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February 27, 2008

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SD

One of the more interesting Web 2.0 attempts to sell stock on oneself was this failed effort last month by a minor league pitcher: "(...)Randy Newsom, a reliever last season for the Cleveland Indians’ Class A and AA affiliates, set up a Web site through which fans and other outsiders could purchase a piece of his future major league earnings. Through Thursday, Newsom had sold about 1,800 shares of himself at $20 apiece. Each share afforded the bearer .002 percent of his career pay, uniting his goals with investors who hope he makes it big(...)Offerings shopped over the Internet must be registered with the S.E.C., and Newsom’s was not. After speaking with a lawyer for M.L.B. on Thursday afternoon, Newsom decided to table his idea(...)" http://www.nytimes.com/2008/02/01/sports/baseball/01minors.html

gp237

good comeback cody, even better let the shows speak for themselves. great job guys!

Cody

Wow, The question now then, SD, is whether the market would price in that tendency to overestimate, certainly the game-ability of it would fade over time.

SD

Here's a 20 minute talk Gilbert delivered at the TED conference a few years ago-- http://www.ted.com/index.php/talks/view/id/97

Audio feed is downloadable to iTunes so conveniently made for nice iPod listening for me a few days ago.

SD

Unlike equities (and more resemblant to bonds) the pricing model for emotional optinons would have to incorporate a mean reverting component. In his wonderful book "Stumbling on Happiness" (a great book for its compilation of interesting research in social psychology; I think a couple pages on confirmation biases are particularly relevant for trading), Harvard psychologist Daniel Gilbert writes about how we have happiness "set points" that our emotional state consistently reverts to. People's affective forecasting (i.e. forecasting of their emotional states) is biased in that they often overestimate the emotional impact of events.

If you could trade be a counterparty to other people's trading of options on their emotional state, look to take the other side of how this bias distorts the options pricing.

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About Me

Cody_1a

  • CODY WILLARD
    THE BIG APPLE, NEW YORK
  • Cody Willard is the general manager of CL Willard Capital. Find him at TheStreet.com, the Financial Times, on TV, or even playing that rock n' roll.

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