The Most Dangerous Equation, or Why Small is Not Beautiful!


Over one billion dollars have been spent in the US to split up big schools into smaller ones because small schools regularly show up in rankings as top performers.

In this post, I will show you why that money was wasted because of a widespread (but not so well known) statistical artifact, so read on!
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Is the Stock Market Efficient? Let your ZIP Compression Tool give an Answer!


One of the most fiercely fought debates in quantitative finance is whether the stock market (or financial markets in general) is (are) efficient, i.e. whether you can find patterns in them that can be profitably used.

If you want to learn about an ingenious method (that is already present in anyone’s computer) to approach that question, read on!
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The Pólya Urn Model: A simple Simulation of “The Rich get Richer”


What is the “opposite” of sampling without replacement? In a classical urn model sampling without replacement means that you don’t replace the ball that you have drawn. Therefore the probability of drawing that colour becomes smaller. How about the opposite, i.e. that the probability becomes bigger? Then you have a so-called Pólya urn model!

Many real-world processes have this self-reinforcing property, e.g. leading to the distribution of wealth or the number of followers on social media. If you want to learn how to simulate such a process with R and encounter some surprising results, read on!
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New Bundesliga Forecasting Tool: Can Underdog Hertha Berlin beat Bayern Munich?


The Bundesliga is Germany’s primary football league. It is one of the most important football leagues in the world, broadcast on television in over 200 countries.

If you want to get your hands on a tool to forecast the result of any game (and perform some more statistical analyses), read on!
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Euro 2020: Will Switzerland kick out Spain too?


One of the big sensations of the UEFA Euro 2020 is that Switzerland kicked out world champion France. We take this as an opportunity to share with you a simple statistical model to predict football (soccer) results with R, so read on!
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Financial X-Rays: Dissect any Price Series with a simple Payoff Diagram


Not many people understand the financial alchemy of modern financial investment vehicles, like hedge funds, that often use sophisticated trading strategies. But everybody understands the meaning of rising and falling markets. Why not simply translate one into the other?

If you want to get your hands on a simple R script that creates an easy-to-understand plot (a profit & loss profile or payoff diagram) out of any price series, read on!
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Parrondo’s Paradox in Finance: Combine two Losing Investments into a Winner


Wikipedia defines Parrondo’s paradox in game theory as

A combination of losing strategies becomes a winning strategy.

If you want to learn more about this fascinating topic and see an application in finance, read on!
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How to be Successful! The Role of Risk-taking: A Simulation Study


When you ask successful people for their advice on how to become successful you will often hear that you have to take risks, often huge risks.

In this post we will examine whether this is good advice with a simple multi-agent simulation, so read on!
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Create Return Triangle Plots with R


How lucrative stocks are in the long run is not only dependent on the length of the investment period but even more on the actual date the investment starts and ends!

Return Triangle Plots are a great way to visualize this phenomenon. If you want to learn more about them and how to create them with R read on!
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