Trading

I’ve wanted to write a post on decentralized delta neutral yield strategies for a while, and with the Shapella fork behind us, it finally compelled me to get going. If you don’t know, the Shapella fork enable staking withdrawals on Ethereum mainnet, and it makes the case for LSDs more compelling as their market dynamics have now been greatly improved. What are LSDs? It’s short for Liquid Staking Derivatives and is a way to create derivatives on top of staked Ether. Hence, if you take Ether, stake it, you’re not just participating in the running of the Ethereum network, at the cost of capital lockups, but you’re also able to leverage this capital indirectly through LSDs in the broader DeFi ecosystem. ...

It’s obvious isn’t it? That we’re heading towards a decentralized future? It might be that it’s just obvious to me, since I’m so deeply involved in this, but the signs are everywhere. From Meta and Twitter collapsing, to oil being replaced by renewables. This shift is aligning us for a new mega trend, one which has been underway in many areas for many years, but now, with improvements in technology, finally enable us to take it all the way. ...

A few days ago someone allegedly paid $1.3 million for a rock. It’s not even a real rock, or a picture of a real rock. And the underlying rock contract doesn’t even follow the NFT standard, as that was established in 2018, after this contract was deployed. But it’s not about the rock, and we’re now in some crazy bubble with lots of internal transactions to make it look like someone paid this much for something. If I’ve got $1.3 millions worth of ETH, and I sell this rock to myself, you know.. ...

This blog post taps into some of the theories outlined by behavioral finance. Specifically I’m going to look at research done on what is called overconfidence. Overconfidence among investors can manifest itself in many ways. One of these forms is excessive optimism (or pessimism) with regards to beliefs in future outcome. Carleton, Chen, and Steiner (1998) and Jegadeesh, and Kim (2003) study the value of analyst recommendations. There are two aspects worth considering specifically in this context. The first is the quality of the recommendations and the second is the market reaction to them. The value of an analyst report can be defined as its impact on the market, thus the quality of the report and market reaction is not mutually exclusive but rather tightly linked. This poses some potential issues as there might be a feedback loop at work here, where analysts with a broader audience could potentially have a bigger impact than more unknown analysts with less exposure. However, given that the topic in question is an anomaly of the efficient market hypothesis, this potential feedback loop is of interest. In an efficient market, any new information in the form of a buy/sell recommendation must only have an immediate impact without any positive serial correlation in future abnormal returns if it represents new information. I will begin by analyzing a number of aspects related to analyst recommendations and proceed to cover market impact. ...