IBankingFAQ

September 8, 2010

Andrew — Wed, 08 Sep 2010 15:00:28 +0000

Are you ready for the fall recruiting season? Those of you who recently started your senior year of college or your second year of an MBA program know that the recruiting season is here. Good luck to all of you!

I want to remind you about my financial modeling self study program, which costs only $49. You can learn how to build a financial model in the comfort of your own home or office. Knowing how to build an integrated cash flow model will definitely help you in your interviews plus it is a great way to prep for those dreaded technical interview questions. Click to view more information about the financial modeling self study program.

I also want to remind you about my coaching services. We can schedule sessions in person (in NY) or over the phone and cover resumes, general recruiting and interviewing advice as well as mock interviews. Click to view more information about the interview and job search coaching.

As always, I look forward to your comments/suggestions/questions and emails (andrew [at] ibankingfaq.com).

August 3, 2010

Andrew — Tue, 03 Aug 2010 16:02:07 +0000

Are you ready for the fall recruiting season? Those of you going into your senior year of college or your second year of an MBA program know that the recruiting season will be here soon (the summer just goes by too quickly, doesn’t it?). For you students and for all of the rest of you interested in investment banking, I want to bring to your attention a course that I’ll be teaching in New York City starting September 11. The course runs on Saturday and Sunday for two consecutive weeks and covers valuation and financial modeling as well as basic accounting, corporate finance and financial statement analysis. The course is great preparation for investment banking interviews, especially those stressful technical questions.

To register for the course or for more information, please visit the Institute for Finance website.

I also want to remind you about the financial modeling self study program, which costs only $79. So if you are not able to make it to New York for one of my lives classes, you can learn how to build a financial model in the comfort of your own home or office. Click to view more information about the financial modeling self study program.

As always, I look forward to your comments/suggestions/questions and emails (andrew [at] ibankingfaq.com).

July 12, 2010

Andrew — Mon, 12 Jul 2010 21:42:37 +0000

Are you ready for the fall recruiting season? Those of you going into your senior year of college or your second year of an MBA program know that the recruiting season will be here soon (the summer just goes by too quickly, doesn’t it?). For you students and for all of the rest of you interested in investment banking, I want to bring to your attention a course that I’ll be teaching in New York City starting July 31. The course runs on Saturday and Sunday for two consecutive weeks and covers valuation and financial modeling as well as basic accounting, corporate finance and financial statement analysis. The course is great preparation for investment banking interviews, especially those stressful technical questions.

To register for the course or for more information, please visit the Institute for Finance website.

I also want to let you know that I’m offering a special price for the summer on the financial modeling self study program. I’ve reduced the price to only $19 from the old price of $49. I hope that you will take advantage of this limited time offer. Click to view more information about the financial modeling self study program.

As always, I look forward to your comments/suggestions/questions and emails (andrew [at] ibankingfaq.com).

January 27, 2010

Andrew — Wed, 27 Jan 2010 23:16:25 +0000

To those of you who are still in the interview process for summer internships, good luck! And my congratulations to those of you who have accepted offers.

I’ve made some changes to the home page of IBankingFAQ (the page you’re on now) so it’s not so static. I intend to use this top section to highlight any changes or updates to the site and other communications to readers. The old home page is the About page, where you can read about the site. Below this section is a random FAQ that will change whenever you refresh the page.

You may have noticed a new purple banner at the top of the screen advertising a new self study program that I’ve developed to teach basic financial modeling. This is something that has been in the works for a while and I’m pretty excited about it. You can learn more about the Financial Modeling Self Study Program.

As always, I look forward to your comments/suggestions/questions and emails (andrew [at] ibankingfaq.com).

October 8, 2009

Andrew — Wed, 27 Jan 2010 22:51:43 +0000

I have upgraded the site’s theme. I am still making some tweaks, but the upgrade is substantially complete. Please contact me if you find any bugs or have difficulty finding any of the content.

You have 100 balls (50 black balls and 50 white balls) and 2 buckets. How do you divide the balls into the two buckets so as to maximize the probability of selecting a black ball if 1 ball is chosen from 1 of the buckets at random?

Andrew — Wed, 27 Jan 2010 17:40:55 +0000

Just to be perfectly clear, you are assuming that one of the two buckets is chosen at random and then one of the balls from that bucket is chosen at random. You want to put 1 black ball in 1 of the buckets and all of the other 99 balls in the other bucket. This gives you just slightly less than a 75% change of having a black ball chosen. The math works as follows: There’s a 50% chance of selecting the bucket containing 1 ball with a 100% chance of selecting a black ball from that bucket. And a 50% chance of selecting the bucket containing 99 balls with a ~49.5% (49/99) chance of selecting a black ball from that bucket. Total probability of selecting a black ball is (50% % 100%) + (50% * 49.5%) = 74.7%.

October 6, 2009

Andrew — Tue, 06 Oct 2009 14:13:11 +0000

I’m currently working on upgrading the site’s theme. All of the content should be here but might be a little harder to find. Sorry also for the random banner images. Hopefully things will be fixed up shortly.

Is investing in stocks really investing?

Andrew — Tue, 18 Aug 2009 23:37:27 +0000

No. Buying stocks is speculating. Even if you’re buying value stocks. Even if you’re planning to hold stocks for the long-term (whatever that means). I wish more people understood this. Anytime you spend money on the hope and prayer that the thing you bought appreciates in value, you are speculating, not investing. Here’s another way to think about it. If you have significant control over your spent money (say, starting a business or building a new factory) then you’re investing. If you don’t then you’re speculating.

Oh, and one last thing: speculating is just a more acceptable synonym for gambling.

Does technical analysis work?

Andrew — Tue, 18 Aug 2009 23:15:16 +0000

Yes. No. Maybe.

I think all three are correct depending on how we define technical analysis. Academics have known for about 15 years that stocks with positive momentum tend to outperform stocks with negative momentum. Traders and speculators have probably known this for centuries longer. If we define technical analysis as using information contained in historical prices (and other information such as trading volume) to predict future prices than there is no question the answer is yes, technical analysis does work. Most quantitative trading methods (including high frequency trading) is based on this sort of analysis. In fact, I would go as far as to say that much of what people view as fundamental analysis is actually technical analysis. I would argue that much of value investing (e.g. buying stocks with low Price/Book Value ratios or Price/Earnings ratios is actually a reflection of technical factors (the stock has gone down in the past) than it is of fundamental factors such as its book value or earnings.

If, however, we define technical analysis as humans looking at charts looking for patterns which they then give cool names, I am more than a little skeptical. Not because the charts don’t contain good information (they contain the same information used by the computers discussed above) but because I am skeptical that humans can consistently and correctly interpret this information. I do leave open the possible that certain exceptional individuals can indeed profit from interpreting such charts.

I’ve stated that technical analysis is essentially just momentum investing (I use the word investing loosely). I think its worth mentioning that virtually all trading is based on momentum investing. Of course the downside of momentum (from the trader’s perspective) as a strategy is that it works until it doesn’t. Which is to say you’ve got to get out in time (no easy task), making it a risky strategy. From the market’s prospective, it is not difficult to see the relationship between momentum and frothy markets.

Does fundamental analysis work?

Andrew — Tue, 18 Aug 2009 22:49:50 +0000

As we alluded to when we were discussing the efficiency of markets, fundamental analysis works if and only if you can discover important enough non-public information AND that non-public information will become public within a reasonable time frame. It is not enough to discover the information because if other market participants don’t learn about it (there’s no “catalyst”), prices won’t reflect it and you can’t make money on it.

Now, one type of non-public information would be to have a different (better) view on the company’s prospects or on say, macroeconomic prospects. Three things make this very difficult in practice. Firstly, it is very difficult to be smarter than the market. Second, even if you are correct, it often takes much longer to be proven right, hurting your returns (or worse). This is analogous to Keyne’s famous statement that the market can remain irrational far longer than you can be solvent. I would, of course, modify this to say that the market can remain stupid far longer than you can be solvent. Third, since the market tends to lean towards optimism most of the time, having a contrarian view usually means being short the market. Shorting the market brings its own set of risks and is a strategy that is extraordinarily difficult with which to make money. You may have noted that numbers 2 and 3 help illustrate why bubbles can persist for a long time.