Anthony Lee Zhang Profile picture
Assistant Professor of Finance, UChicago Booth. Likes/retweets != endorsements, tweets/likes/retweets != investing advice, etc.
𝔽_un Profile picture 1 added to My Authors
30 Mar
This is interesting as it raises a fun "boundaries of the firm" question. In the past, writing, editing, publishing, graphics, etc. were organized within firm boundaries. Substack makes writers mini-entrepreneurs
At the moment they do their own editing/etc., but you can imagine industries will pop up to provide editing, etc. services for creator economies.

But if these are organized as arms-length transactions rather than within a firm, how does this affect moral hazard/agency issues?
In a big firm, proofreaders/researcher/editors have reputational incentives to get things right. If you hire these Upwork-style, do they have similar incentives? Presumably ratings matter, so that's one thing
Read 5 tweets
30 Mar
The recent Archegos saga is a fun piece of game theory. Stylized model:

- Suppose Hwang is long $50bil of, e.g. Tencent on 5x leverage. Technically this is being held by a few banks on his behalf, say, Goldman, Morgan Stanley, Nomura
Suppose Hwang runs out of margin and the banks decide to sell off his position. They realize they are stuck in a kind of prisoner's dilemma.
Trades move markets. If you try to sell $50bil of Tencent into the markets in a day, well, there aren't many buyers so you'll end up with much less than $50bil.
Read 7 tweets
29 Mar
One thing ex-post kind of puzzling. In the US, there seems to have been much more public skepticism/outrage/distrust about mask-wearing, compared to vaccination
This is interesting because:

1. Masks, whether they are useful or not, are not new, and obviously not harmful
2. The vaccine is totally new science
You might think the American population's opposition towards 1. is driven by anti-science sentiment or something. It is then puzzling that ppl have been so willing to embrace 2., with (afaik) so little backlash/conspiracy theory/etc surrounding it
Read 14 tweets
28 Mar
Cool idea. Somewhat related: there seems to be a difference between "specialist" and "generalist" kind of roles in general in industry, government, etc
"Technology" being inherent highly "specialized". "Technocracy" might be defined as "we should run society by dividing social problems into specialized chunks and assigning the best specialist to each chunk"
Other social roles such as being a CEO, news reporter, <others?> are inherently "generalist" in the sense that they require interfacing with lots of different specialist areas. Role perhaps is somewhat more about understanding emergent system-level properties/drawing connections
Read 5 tweets
23 Feb
If you're in a top-10-ish US undergrad, there is a playbook which still gets you a good shot at top-10 econ PhD programs straight out of undergrad

(I think it's extremely unfair that this essentially only works for top US programs, but, info is info)
1. Major in math, or any major that lets you take hard math classes. Definitely take real analysis, and if possible a couple higher level classes (e.g. measure theory, stochastics, functional analysis, etc.)
2. Skip most of undergrad econ. Take a few classes in the PhD first year and get A's

3. RA for econ faculty, starting from around 2nd or 3rd year

4. Aim to have all this done by end of 3rd year/start of 4th year
Read 9 tweets
23 Feb
Hate to be a broken record but. Blockchain. Videogame. Skins! Do it! Artificial scarcity! Tokenize everything!

notboring.co/p/the-value-ch…
There is a huge demand to non-fungible-ize things. Own a mass-produced watch, pass it down a few generations, and it becomes a family heirloom - different from every other identical watch coming off the same factory line. A physical NFT
Bottle up some grape juice, hire some famous artists to slap a label on it and it's worth thousands (wine folks, don't cancel me)
Read 5 tweets
21 Feb
This is good and basically a 5 minute read

chiefofstuff.substack.com/p/commenting-v…
Quote. Applies for giving feedback on papers also. I find the most useful feedback comes from, put yourself in the author's shoes. What is something they _could realistically do_, which _they might also be interested in doing_, that they may have missed? Image
I think here are some "mistakes":

- Wishful thinking: wouldn't it be great if you used microdata instead of aggregate data (yes but I don't have it), wouldn't it be great if you had a perfect instrument (don't have it)
Read 4 tweets
21 Feb
Fun fact: there is a financing trick called a "seller carryback", or just "seller financing". Where you buy a house/business/etc., with money borrowed from the house seller. Pretty popular in real estate and small business world, apparently. Here's how it works.
Suppose you see a small business, say, this car wash. It makes $80k a year. You think you could run it more efficiently, to produce say $120k a year. You want to buy it from the owner for say $2mil. However you don't have $2mil, you need financing Image
Suppose you can't find a bank to lend you money to buy the car wash. You can instead buy the car wash with money borrowed from the car wash owner. That is, you pay the owner $2mil, but you immediately borrow $1.5mil from them, that you pay off at, say, 4% annual interest or so
Read 16 tweets
20 Feb
Building on @ben_golub's about a field coffee-chat Slack group: what if we had Slack (or other chat) groups organized around commonly used datasets? e.g. a demographic data Slack (ACS, CPS, Census, PSID, etc.), or banking data (call reports, HMDA), etc
Goal being, essentially, to build a slightly more modern version of statalist. Or basically an econ data stackexchange, in chat form. It seems to me that Q&A-style social platforms are relatively easy to get going, compared to pure social platforms like Clubhouse
cc @arpitrage from the other thread. To be honest, a lot of the documentation issues might be better solved with a stackexchange than a big manual. Nobody reads big manuals, but everyone googles questions
Read 6 tweets
12 Feb
Random thought: there seems to be "hidden curriculum" stuff in many lines of work. Academia, of course, but also: how to schmooze your way into a tech internship/offer, how to get onto good projects, be visible, and get promoted quickly in tech,
What specific combination of extracurriculars gets you into Harvard without buying the fencing coach a house or winning the IMO, etc
My parents think this is a fairly "hidden curriculum-heavy" era. Perhaps they are biased by their experience, growing up in post-cultural-revolution China. Exams were newly re-established, basically meritocratic and without many loopholes. Maybe most eras look like our era
Read 18 tweets
9 Feb
Cool paper Image
Couple other NBER's I'm reading this week ImageImageImage
Read 4 tweets
30 Jan
Train headed towards 5 people, you can redirect it to one person by pulling a switch. Do you pull it?

The bureaucrat: I am not getting anywhere close to that switch. If I don't touch that switch it's someone else's problem. Touch the switch and it becomes my problem
I don't think this is necc the bureaucrats' fault, though. It's mostly incentives.

IMO the difference between a bureaucrat and, say, a CEO or product manager is that the bureaucrat doesn't have any/enough exposure to the upside from his actions
When you think of the FTC/DOJ/SEC/FDA/etc can you think of one single example where they are cast in a good light? Where an innovative policy worked out really well, magazine profiles/interviews of the ppl that built it out?
Read 16 tweets
26 Jan
I am still following r/wsb relatively closely, as this is a pretty incredible cultural phenomenon. WSB seems to view itself not only as a money machine, but also as a kind of righteous rebellion against the corrupt finance establishment (31.7k likes is huge)
All manner of guesswork/conspiracy about institutional collusion starting to get posted. The brokers are in on it, etc., not just the obvious explanation of jacking up margins in response to increased vol (I believe this is more likely?)
See for example this ongoing 3-part essay: quality of the narrative is really something

reddit.com/r/wallstreetbe…
Read 18 tweets
25 Jan
OK so: what is a gamma squeeze?

Suppose gamestop GME is trading at $20. You buy a bunch of call options with strike $30 from your market maker (MM)

You have a long call position on GME, so you profit if GME goes up
MM has a short call position, so MM loses money if GME goes up
MM, however, doesn't actually want to take bets on GME. MM's trick is that MM takes a position in the underlying stock which hedges the call option. MM thus buys a bunch of GME stock. If GME goes up, MM loses money on her option position, but gains on her stock position
Any security based on GME is, in a very short span of time, simply a bet on whether GME will go up or down. Hence, you can hedge any security just by taking a position in GME. This is called "delta hedging"

(there is some subtlety here which I'll gloss over for now)
Read 16 tweets
23 Jan
Some more thoughts on "do research you enjoy" vs "follow this advice to write 3 AERs":

I had a strong negative reaction to advice to simply "do research you enjoy" in grad school and I think I've finally figured out my main issue with this advice
Think about many enjoyable human activities: music, sports, videogames. These are done primarily for fun, but the nature of these is that for many people, they are just more fun when you are good at them than when you are not
Some component of this is subjective, but many people have more fun playing moonlight sonata than mary had a little lamb. Many people like landing 50 straight free throws, 70% headshot rate in counterstrike, etc., this materially changes the experience of the hobby
Read 19 tweets
18 Jan
While I don't completely agree with the sentiment, I think the median person - even perhaps the median econ grad student - would be more impactful, richer, and happier in industry than in academia
Nontrivial fraction of students never work a full-time job before grad school. Ofc not everyone has the luxury to do so, especially with grad admissions becoming more and more competitive, but I did and found it really useful for discovering my preferences
Knowing really what the industry option looks like helps a lot in keeping sane during grad school, and just helps you think clearly about your personal tradeoffs
Read 12 tweets
12 Jan
I often say to grad students: a reasonable thing to aim for in grad school is ~2-3 essentially complete and posted papers, alongside your JMP. This often looks like your JMP, plus your 2nd-yr paper, a paper from RA'ing for a faculty, or from working with classmates
Of course, some people get top jobs with only one very, very good paper. This is very risky though - you don't know ex-ante whether your paper will be very good! Most schools care about productivity, so having a couple of completed papers helps
Even if the papers are not change-the-world papers. Also, it exercises your paper-writing muscle. Not everyone comes into grad school ready to write ECMA's!
Read 24 tweets
13 Dec 20
Largely agree with Ben's points here, some other thoughts...

In physics, mathematical models are either basically correct or not. Newton's laws either hold in all cases or are a wrong (or at least, incomplete and approximate) view of the world
We're taught modern physics through famous experiments that show "edge cases" (double slit experiment, gravity bending light, etc.) which falsify classical physics
The implicit philosophy of science here is that any evidence demonstrating a case where theory doesn't hold implies

- The old theory is wrong
- A new/broader theory is needed
Read 11 tweets
12 Mar 20
@lukestein @ben_golub @bennpeifert Agree essentially on all points, I'm just saying you shouldn't expect to make money if you sell the near-term options underlying the VIX. The market basically seems to expect a lot of vol in a short time frame
@lukestein @ben_golub @bennpeifert Also VIX squared forecasts variance for any jump-free process, it doesn't rely on Black-Scholes assumptions (it used to, but they switched to the model-free formula summing across strikes at some point)
@lukestein @ben_golub @bennpeifert from the white paper cboe.com/micro/vix/vixw…

And Demeterfi, Derman, Kamal, and Zou (1999)
Read 8 tweets