CFTC allows futures trading in Box Office opening sales.

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G.v.K
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Re: CFTC allows futures trading in Box Office opening sales.

Postby G.v.K » Sun Jun 20, 2010 12:27 am UTC

Dark567 wrote:No the evidence isn't scientific, mostly because there isn't any type of control group(this is a general problem in economics though).


for me, that is why economics and the social sciences tend to produce little in the way of valuable knowledge. without any proper empirical ground to debate on, we are really just having a political/moral discussion on these matters.

Dark567 wrote:Its very unlikely its pure chance, the chances anyone person could randomly do what Buffet did is something like 1 in 16 quadrillion(this was from finance course I took it college... so I am a little unsure of the accuracy) which means even the chances that anyone on earth did that is still like 1 in a million.


well, Warren Buffet is successful so that is already something. just like our eyes and ears and all the rest 'worked' in the sense that we haven't yet become extinct.

Dark567 wrote:There is a relationship between profits and good outcomes(assuming those profits weren't made via fraud) the good outcomes though is defined by providing services that people want. So even if your favorite movies weren't the most profitable, many other people must be enjoying the movies that are, which is why it is a good outcome. Its not quality=profit, its providing services people want=profit. Sometimes those are quality sometimes the services are just cheap shit.


i guess most of the time people more or less know what is good for them so profitability is a reasonable approximation of 'quality'. but when it comes to art and other 'high culture', history shows that often what proved to be best in the long run was unpopular and hence unprofitable at the time it was made. it might even be that short-term profitability is a good negative indicator of long-term 'quality'. first weekend box office results is really really short-term.

nowfocus
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Re: CFTC allows futures trading in Box Office opening sales.

Postby nowfocus » Sun Jun 20, 2010 1:38 am UTC

G.v.K wrote:
Dark567 wrote:No the evidence isn't scientific, mostly because there isn't any type of control group(this is a general problem in economics though).


for me, that is why economics and the social sciences tend to produce little in the way of valuable knowledge. without any proper empirical ground to debate on, we are really just having a political/moral discussion on these matters.


?? You don't need a strict experimental design to obtain scientific evidence. While experiments with neat control groups provide the highest level of identifiabiliy, difference-in-difference desgins, regression discontinuity designs, and and several other empirical techniques allow for the well-identified parameters under weak assumptions without a strict 'control group'.

In this case, we don't have a study to measure the effects, possibly because we haven't really looked. Still, much of economic theory is based on rigorous evidence.
Vaniver wrote:They can participate- the hope is that they'll be able to participate enough to keep American moviemakers making expensive movies, but not enough that we see The Producers scenarios where people try to dishonestly cash out on intentional flops.


I doubt they'll be able to strike the right balance between preventing shenanigans and making the market useful enough to studios to make it worthwhile.
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G.v.K
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Re: CFTC allows futures trading in Box Office opening sales.

Postby G.v.K » Sun Jun 20, 2010 5:01 am UTC

nowfocus wrote:?? You don't need a strict experimental design to obtain scientific evidence. While experiments with neat control groups provide the highest level of identifiabiliy, difference-in-difference desgins, regression discontinuity designs, and and several other empirical techniques allow for the well-identified parameters under weak assumptions without a strict 'control group'.


you're right. but the problem with these methods is that they leave a large amount of wiggle room in the introduction of variables. classic case of the results of this are the 'just so' associated with evolutionary theory.

it's also the case that these disciplines (history, economics, social science) are the ones most closely associated with political issues and hence attract the sort of people who seem to want to deliberately muddy the empirical waters.

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Re: CFTC allows futures trading in Box Office opening sales.

Postby Iceman » Sun Jun 20, 2010 6:46 am UTC

The 'Science' behind Finance is really a matter of showing equivalencies.
It's less an observable science as it is a mathematical one, with things being correct by definition. If the Risk free rate is 5%, then $100 today is worth $105 next year...period. Whether people's behavior matches this is a different story and gets into human nature.

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Re: CFTC allows futures trading in Box Office opening sales.

Postby G.v.K » Mon Jun 21, 2010 4:43 am UTC

Iceman wrote:The 'Science' behind Finance is really a matter of showing equivalencies.
It's less an observable science as it is a mathematical one, with things being correct by definition. If the Risk free rate is 5%, then $100 today is worth $105 next year...period. Whether people's behavior matches this is a different story and gets into human nature.


i would have thought the interaction of the mathematics with the way people use it is precisely where social science comes into its element. isn't economics supposed to be a social science?

Greenspan's surprise that business did not act in its own interest (thereby causing the GFC) reminds of the surprise of a computer programmer when they actually find out how people are using (and breaking) their programs.

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Re: CFTC allows futures trading in Box Office opening sales.

Postby Iceman » Tue Jun 22, 2010 4:19 am UTC

Finance is not Economics.

Economics is also a bad predictor of people's real behaviour because it assumes people act rationally.

The fault in Finance is more that it assumes certain values, like 'required rate of return' and 'volatility' which can only ever be guesses based on historical data. The math works fine assuming certain numbers, but we can never know those numbers are reality.

Greenspan's surprise is really something known as the 'Agency Problem' in Finance....it is not in the interest of Employees of a firm to act in the Firm's best interest, nor is it in the Shareholder's best interests to act in debtholder's best interests...or Management's best interests to work in shareholder's best interests etc... There's always a problem of somoene being an Agent acting for someone else, and their motivations do not coincide.

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Re: CFTC allows futures trading in Box Office opening sales.

Postby G.v.K » Tue Jun 22, 2010 8:14 am UTC

Iceman wrote:Finance is not Economics.

Economics is also a bad predictor of people's real behaviour because it assumes people act rationally.

The fault in Finance is more that it assumes certain values, like 'required rate of return' and 'volatility' which can only ever be guesses based on historical data. The math works fine assuming certain numbers, but we can never know those numbers are reality.

Greenspan's surprise is really something known as the 'Agency Problem' in Finance....it is not in the interest of Employees of a firm to act in the Firm's best interest, nor is it in the Shareholder's best interests to act in debtholder's best interests...or Management's best interests to work in shareholder's best interests etc... There's always a problem of somoene being an Agent acting for someone else, and their motivations do not coincide.


surely the Agency Problem is a classic example of an empirically testable (true?) theory contradicting a false axiom.

why should economics assume people act rationally? why can't it test how people do act? why weren''t Greenspan's policies based on how people really act rather than some idealistic fairly tale?

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Re: CFTC allows futures trading in Box Office opening sales.

Postby Indon » Tue Jun 22, 2010 12:44 pm UTC

Iceman wrote:The Smartest people allocating where the world's investment capital goes does seem like the best way to allot funds. Allowing the smart money to dictate which things get funding through natural self interest makes a lot of sense.

Sure, but that's not what futures trading is.

Smart people can already allocate the world's investment capital into movies - by investing into movies!

Iceman wrote:You're all making comparisons to bubbles...but Futures can't create bubbles. Stocks can.


If not through overestimation of earnings, how else do stocks generate bubbles?

-People drop money into something they think is more valuable than it really is.
-Turns out not to be that valuable.
-People lose a lot of money.
-???
-Un-profit!


Iceman wrote:Economics is also a bad predictor of people's real behaviour because it assumes people act rationally.


While I don't hold much esteem for the discipline, I feel I should note that not all economics is like this.
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Iceman
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Re: CFTC allows futures trading in Box Office opening sales.

Postby Iceman » Tue Jun 22, 2010 11:00 pm UTC

G.v.K wrote:
surely the Agency Problem is a classic example of an empirically testable (true?) theory contradicting a false axiom.

why should economics assume people act rationally? why can't it test how people do act? why weren''t Greenspan's policies based on how people really act rather than some idealistic fairly tale?


There's the theoretical Economics and Finance, and the Applied side. The applied side can look at what people actually do, But the theoretical stuff is really based on what people should be doing if acting rationally. Greenspan's theory was largely based on the idea of long term views of projects. The products merely got so complicated that no one truly understood the problem they were creating.

Indon wrote:Smart people can already allocate the world's investment capital into movies - by investing into movies!


No, they can't. You can invest in movie companies, or independent projects, but you can't go invest in Transformers 3.
Also by using futures you can lower the risk of investing in movies, thereby encouraging more investment.

Indon wrote:If not through overestimation of earnings, how else do stocks generate bubbles?

-People drop money into something they think is more valuable than it really is.
-Turns out not to be that valuable.
-People lose a lot of money.
-???
-Un-profit!


It's more often an over-estimation of growth, market share and revenues as opposed to earnings, and thats really more the issue in the Dot.com problem.
The thing is the companies are losing money, negative earnings, but people say 'oh their revenue is growing though' and then they value the company based on how big they think it will be in the future which will impact very distant earnings. The Movie futures would have earnings in a very near term which are verified and then the contract settles and terminates, that's not the same at all.

The different between a Bubble and Merely overvaluing a contract is that the contract does not 'Hold' value.

Imagine: 1000 contracts and 1000 Shares.

With the contracts, People enter into 900 contracts at $100 and then 100 contracts at $150...No money changes hands as these contracts are entered into. The next day the Spot price is $150...The people who have shorted the 900 at $100 have lost $50 each so far, the ones long have made $50 each, and the others are even....A month goes by and its settlement day and the spot price is only $50.
The People who went long the contracts lost 900*50 and 100*100 , and the people who went short made 900*50 and 100*100.
Zero sum...No wealth is created, nor is it destroyed, it merely transfers from one party to another.

Do it with Stocks. 900 shares are bought at $100, and then 100 shares at $150. $105,000 goes to the sellers from the buyers. The next day the stock price is $150...no money changes hands, but Now the combined value of the shares is $150,000...but only $105,000 was spent...wealth was created. A month later the share price drops to $50. Now the entire issue is only $50,000, wealth has been destroyed.
This is NOT Zero Sum, The difference here is that All of the shares adopt the value of the last sale price, so the combined value of all the shares of a company can rise without any money entering the situation. This creates the appearance that more wealth exists...people can then borrow off that wealth or begin to count it, and when the bubble bursts, it comes crashing down.

That's the case with Dot.com and housing...people created this Wealth position which wasn't really worth it, with those assets they borrowed against it, and when it crashes down it brings everything down with it.
Futures values are direct payments from one party to another, value can't increase or decrease without an actual cashflow in and out, it cannot ever be a bubble.


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