Home » economics (Page 2)
Category Archives: economics
B y now, the fallout from the epic financial crisis is both familiar and tangible: foreclosed mortgages, failed banks, lost jobs, recession. On the less tangible side, the meltdown also shook faith in a widely accepted economic principle: Markets are efficient. Since the mid-1960s, many academics have embraced the theory that prices paid in large public markets, such as those in stocks and bonds, reflect the collective wisdom of investors acting rationally on all available information. Yet there’s been growing recognition during the past 15 to 20 years that human psychology — including irrationality — can play havoc with the wisdom of crowds. The historic bursting of the real estate and financial bubbles further undermined the belief that investors and markets behave with machine-like perfection.The crisis also gave new relevance to the work of Charles M.C. Lee, who joined the Stanford Graduate School of Business as a full-time faculty member in July 2009. The professor of accounting has been at the forefront of the debate about market efficiency for nearly two decades. He was an early believer in the relevance of human behavioral patterns to market dynamics. Lee is among the pioneers in developing computer-based strategies for stock selection that take into account behavioral factors such as the tendency for investors to be overconfident or to ignore statistical likelihoods. The techniques he developed for valuing companies and predicting stock price movements help investors systematically evaluate and trade equities by taking advantage of market mispricings.
When we confront a situation, our mind looks for a precedent among past actions without regard to whether a decision was made in emotional or unemotional circumstances. Which means we end up repeating our mistakes, even after we’ve cooled off.I said that Eduardo and I wondered if past emotions influence future actions, but, really, we worried about it. If we were right, and recklessly poor emotional decisions guide later “rational” moments, well, then, we’re not terribly sophisticated decision makers, are we?To test the idea, we needed to observe some emotional decisions. So we annoyed some people, by showing them a five-minute clip from the movie Life as a House, in which an arrogant boss fires an architect who proceeds to smash the firm’s models. We made other subjects happy, by showing them—what else?—a clip from the TV show Friends. (Eduardo’s previous research had established the emotional effects of these clips).Right after that, we had them play a classic economics game known as the ultimatum game, in which a “sender” (in this case, Eduardo and I) has $20 and offers a “receiver” (the movie watcher) a portion of the money. Some offers are fair (an even split) and some are unfair (you get $5, we get $15). The receiver can either accept or reject the offer. If he rejects it, both sides get nothing.Traditional economics predicts that people—as rational beings—will accept any offer of money rather than reject an offer and get zero. But behavioral economics shows that people often prefer to lose money in order to punish a person making an unfair offer.
Image via Wikipedia
I introduced a few terms namely:
PV/BCWS , EV/BCWP -,AC/ACWP, CV , SV , CPI , and SPI.
Now, before using EVM , you first need to put in place a structure so that Earned Value Methodology can be used.
This is relatively simple if you are familiar with breaking down your project into products and/or work packages, work packages that can be broken down into its component parts.
This procedure is called creating a Work Breakdown Structure (WBS). You then make a list of the activities that produce the products and sub-products. This post will not go into the details of creating a WBS. That can be the subject of another post.
Once you have gone about and drawn up a schedule for your project and allocated resources to your project, assuming you have done your homework, you should ideally execute your plan and have everything done by the planned date, with the budgeted cost and execute the planned scope per the expected quality. (Its about scope, cost, time & quality and a quality product needs a quality plan and I’m not talking just testing plans and/or testing for quality, but the project plan itself should be of the highest quality.)
But its not an ideal world and you have to track your project cost and progress to make sure that you are on the right track.
"We have usually made our best purchases when apprehensions about some macro event were at a peak. Fear is the foe of the faddist, but the friend of the fundamentalist." - Warren Buffett
Image by Pete Zarria via Flickr
"Since the long-term corporate outlook changes only infrequently, dividend patterns should change no more often. But over time distributable earnings that have been withheld by managers should earn their keep. If earnings have been unwisely retained, it is likely that managers, too, have been unwisely retained." - Warren Buffett
Inflation is a tax on the poor.