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Editor’s Note September 2016 Hearty greetings to all! With great excitement, team Quantinuum presents “Quriosity” - the quant magazine of SIMSR. In this issue, we have the main story by Rupal Doshi on “Analytics in Our Daily Lives”, which tells us how we make use of analytics even for the smallest of our tasks. The sub article by Aviral Juneja on “Behavioral Finance” talks about the behavior of investors and its implications on the financial market. Theories related to Behavioral Finance are explained along with the examples. In our Quant guru section, Anish Saggar writes about Brahmagupta, who was also a famous Indian mathematician and astronomer. The News digest features news related to analytics covered by Maheshwaran Kumar. Curiosity updates by Arunava Dey covers the recent findings about the possibility of existence of water on the Jupiter’s moon and about the findings of NASA’s Curiosity Rover. Further to stimulate the grey matter in your brain; we bring to you QuantFun with its new features! So, look around and enjoy reading about the quantitative aspect of world. Happy Learning, Editorial Team!
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Contents 1.
Topics
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Analytics in Daily Lives
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Behavioral Analytics
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Quant Guru
9
News Digest
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Curiosity Updates
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Quant Fun
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Quant Connect
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Cover Story September 2016 Analytics in Our Daily Lives Databases, analytics, and statistics are words that are mostly associated with the professional world. But everyone is unaware that data analysis isn’t something that can be only meant for data scientists. In reality, everybody exploits the ability to analyse, search, find patterns and make predictions a lot more in their everyday lives than they do for their business needs. Thus, it can be said that data analysis is everywhere. A great deal of day-to-day lives and much of decision-making is a form of or the result of an analytical process. Facebook knows to suggest new friends, Google can complete search before one has even typed the third letter, and Netflix predicts which television shows one would likely enjoy. Every time someone looks up a restaurant on Zomato, and chooses the highest rated he’s betting on the statistical chance that he will enjoy a good meal there. Some examples of data analytics in our lives is Social media stats instantly register anytime there’s a visitor or a post to a page. Cell phone bills can pull up months of calling data to show you patterns of usage. Sensors monitor the changing weather and report that data to you instantly on your Smartphone. Sports fans collect statistics on their favourite athletes and often use the data to form teams for “fantasy” leagues. Schools across the nation are involved in high stakes testing that generate voluminous data on each student’s progress. Educators then utilize data generated from extensive reports to drive their instruction. Everyone always has consumed vast amounts of data in their lives, and everyone’s brains have always looked for patterns to make sense of them. But it’s only quite recently that technology has understood data analytics. Sensors and trackers are finally small enough to be easily carried around and used all the time, a process that’s constantly accelerating as we get closer and closer to a fully evolved Internet of Things. Mobile phones are now so powerful that they can store both large amounts of data and the necessary programs to analyse it. Finally, the emergence of the cloud has made a myriad of apps, storage options, and sharing possible. Everything from sleep to exercise, to food intake to mood and well-being is tracked, measured, and shared nowadays. What we get in the end, and what we are aware of and use is just a small sample of what’s going on all around at all times. So how can we use data analytics to make decisions in our daily lives? The New York Times Magazine calls it a “data driven life.” If one wants to measure and analyze data about the way he lives, there are innumerable devices, websites and software programs that can help him put some quantitative measurement into his daily diet. He can wear a small device called Fitbit to help determine if he’s getting the kind of quality sleep he needs and to measure the calories he ingests and the physical movements he makes. If someone is a runner, she can map her route, measure her heart rate and track her progress with a GPS device that even includes a “virtual running mate” to help her keep pace. If one wants to do more than just measure her/him, one can help the environment too. Cyclists can soon use the Copenhagen Wheel, a project from MIT that
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not only measures the effort they expend while cycling but also transmits GPS coordinates with measurements of air pollution, noise level, humidity and temperature to a central database. Not a cyclist? Intel is testing tiny devices that will monitor air quality automatically from a Smartphone. If one doesn’t want to use a device, PCs can do the work for them. Track productivity with Rescue time — free software that monitors how one spends computer time and displays a productivity dashboard. It even lets one block unproductive sites so they can get some real work done. Or just go to the Internet, there are sites where one can track their weight, their mood, the exercise program, blood sugar, drinking habits, and just about anything else that can be measured. Using data analytics to make informed decisions isn’t just for business anymore. Now one can apply the same principles they use at work to measure themselves and make decisions about their personal life and even publish annual report for others to read! - Rupal Doshi PGDM-FS (2016-18)
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Behavioral Finance INTRODUCTION: If we always assume that financial markets are efficient and investors are rational then why there are so many studies about investor's psychology? Investment managers always want to make money for themselves and for their clients. That is the reason they care about the "psychology" factor of financial market as well as investors. The behavior of investors is not always rational, so investment managers do not forget how the psychology factor of a person plays a substantial role in behavior of financial market. But, modern finance theories have almost completely ignored the role of the complex motivational and cognitive factors that influence investor's (the best asset of a company) decision making. In today's buyer-market, we should face the truth that psychology systematically explores human judgment behavior and well-being. It can teach us important facts about how humans differ from traditional economic assumption. DEFINITION: This realization gave birth to Behavioral Finance, a study of the influence of Psychology on the behavior of practitioner and the subsequent effect on markets. Behavioral Finance explains why and how markets might be inefficient. Thus, behavioral finance is a field of study that has evolved which attempts to better understand and explain (through the use of psychology and other social sciences) how emotions and cognitive errors influence investors and the decision-making process. THEORIES OF BEHAVIORAL FINANCE There are four theories of behavioral finance. They are as follows 1- Prospect Theory 2- Regret Theory 3- Anchoring 4- Over-and-under reaction PROSPECT THEORY This theory says people respond differently to equivalent situations depending on whether it is presented in the context of a loss or a gain. Most investors are risk averse when chasing gains but become risk lovers when trying to avoid a loss. EXAMPLE Mr. Gupta had started at 12.00 pm from his hotel room and on his way to airport gets blocked in a huge traffic jam. The plane was scheduled to take off at 3.00 pm. When he had been delayed for two hours, he decided to cancel his ticket, knowing that he cannot make it to the airport in time. The traffic finally got moving around 5.00pm, so he decided to collect his refund from the airport. While he was proceeding to the airport, he was feeling happy that he has saved money by canceling his ticket
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at the last moment and was feeling proud of his decision. However, when he reached the airport at 5.45pm,the ground staff told him that the plane has been delayed by three hours and will take off at 6.00pm.But, it is impossible for him to board it as he cannot get a ticket anymore‌ Mr. Gupta is now cursing himself for the decision he made, for which he was proud, an hour earlier. REGRET THEORY Regret theory is about people's emotional reaction to having made an error of judgment. Investors may avoid selling stocks that have gone down in order to avoid the regret of having made a bad investment and the embarrassment of reporting the loss. They may also find it easier to follow the crowd and buy a popular stock: if it subsequently goes down, it can be rationalized as everyone else owned it. EXAMPLE Sales professionals typically attempt to capitalize on this behavior by offering an inferior option simply to make the primary option appear more attract. ANCHORING Anchoring is a phenomenon in which in the absence of better information, investors assume current prices are about right People tend to give too much weight to recent experience, extrapolating recent trends that often at odds with long run average and probabilities
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EXAMPLE According to a survey by Wall Street journal, at the peak of the Japanese market, 14% of Japanese investors expected a crash, but after it did crash, 32% expected a crash. Many believe, defying logic, that when high percentage of participants becomes overly optimistic or pessimistic about the future it is a signal that the opposite will occur. OVER-AND-UNDER REACTION "The market does not reflect the available information as the professor tells us. But just as the funhouse mirrors don't always accurately reflect your weight, the markets do not always accurately reflect the information. Usually they are too pessimistic when it's bad and too optimistic when it is good". Bill Miller. The consequences of investors putting too much weight on recent news at the expense of other data are market over or under-reaction. People show overconfidence. They tend to become more optimistic when the market goes up and more pessimistic when the market goes down. Hence, prices fall too much on bad news and rise too much on good news. And in certain circumstances, this can lead to extreme events.
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EXAMPLE- Contemporary financial situation is the best example of this theory. In the month of May, 2008 when Sensex was touching 22000 still investors were predicting that it will touch 25000 or 30000 without realizing it was the extreme situation. Investors were putting too much weight on current situation and became optimistic. CONCLUSION: The field of modern financial economics assumes that people behave with extreme rationality, but they do not. The two common mistakes investors make i.e. excessive trading and the tendency to disproportionately hold on to losing investments while selling winners have their origins in human psychology. Because the tendency for human beings to be over confident causes the first mistake and the human desire to avoid regret prompts the second. So, psychological research teaches as about the true form of preferences, allowing us to make finance more realistic within the rational choice framework. This is the reason today Behavioral finance is a rapidly growing area that deals with the influence of psychology on the behavior of financial practitioners. The above-mentioned arguments are provided for why movements towards greater psychological realism in finance will improve mainstream finance. Apart from these things this particular area also collectively predict some outcomes where the traditional models failed along with reaches, the same current predictions as the traditional models. -Aviral Juneja PGDM-A (2015-17)
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Quant Guru September 2016 Brahmagupta Brahmagupta, the son of Jisnugupta, was an Indian mathematician and astronomer who wrote two important works on mathematics and astronomy: BrāhmasphuṭaSiddhānta Khaṇḍakhādyaka He was born in Bhinmal, Rajasthan and was known as Bhillamalacarya (the teacher from Bhillamala). Brahmagupta became the head of the astronomical observatory at Ujjain, which was the foremost mathematical centre of ancient India at this time. Brahmagupta’s work in Mathematics:
Brahmagupta explained how to find the cube and cube-root of an integer and gave rules facilitating the computation of squares and square roots.
He gave the sum of the squares of the first n natural numbers as n(n + 1)(2n + 1)⁄ 6 and the sum of the cubes of the first n natural numbers as (n(n+1)/2)2.
Brahmagupta’s Theorem on cyclic quadrilaterals:
Brahmagupta dedicated a substantial portion of his work to geometry and trigonometry. He established √10 (3.162277) as a good practical approximation for π (3.141593), and gave a formula, now known as Brahmagupta’s Formula, for the area of a cyclic quadrilateral, as well as a celebrated theorem on the diagonals of a cyclic quadrilateral, usually referred to as Brahmagupta’s Theorem.
Use of Zero: o Brahmagupta stated that ‘When ZERO is added to a number or subtracted from a number, the number remains unchanged. A number multiplied by ZERO becomes ZERO.’
Positive and Negative Number Usage: His statements about debt (negative numbers) and fortune (positive numbers) are: A debt minus ZERO is a debt A fortune minus ZERO is a fortune Zero minus Zero is a Zero A debt subtracted from Zero is a fortune A fortune subtracted from Zero is a debt Zero multiplied by debt or fortune is a Zero Zero multiplied by Zero is a Zero Product (multiplication) or Quotient (division) of two debts is a fortune Product of Quotient of two fortunes is a fortune Product of Quotient of a debt and a fortune is a debt
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Brahmagupta established the basic mathematical rules for dealing with zero:
1+0=1 1–0=1 1x0=0 However, his understanding of division by zero was incomplete (he thought that 1 ÷ 0 = 0). Another Indian mathematician, Bhaskara II, showed that the answer should be infinity, not zero (on the grounds that 1 can be divided into an infinite number of pieces of size zero), an answer that was considered correct for centuries.
Before Brahmagupta, the result of 3 – 4 was considered to have no answer or at the most as ’0′. But he introduced the idea of debt (negative numbers) and showed how to borrow and subtract to attain a negative number. Brahmagupta’s work in Astronomy:
Methods for calculating the position of heavenly bodies over time (ephemerides), their rising and setting, conjunctions, and the calculation of solar and lunar eclipses. He observed that the Earth and heaven were spherical and that the Earth is moving.
Muslim astronomer Abu al-Rayhan al-Biruni, in his Ta’rikh al-Hind, criticized his theory of earth being spherical and moving and wrote that: “If such were the case, stones would and trees would fall from the earth.” To this criticism, Brahmagupta responded with the following argument on gravitation: “On the contrary, if that were the case, the earth would not vie in keeping an even and uniform pace with the minutes of heaven, the pranas of the times. All heavy things are attracted towards the center of the earth. The earth on all its sides is the same; all people on earth stand upright, and all heavy things fall down to the earth by a law of nature, for it is the nature of the earth to attract and to keep things, as it is the nature of water to flow, that of fire to burn, and that of wind to set in motion. The earth is the only low thing, and seeds always return to it, in whatever direction you may throw them away, and never rise upwards from the earth.” About the Earth’s gravity Brahmagupta said: “Bodies fall towards the earth as it is in the nature of the earth to attract bodies, just as it is in the nature of water to flow“
-ANISH SAGGAR PGDM-A (2016-18)
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News Digest September 2016 AI Can Recognize Your Face Even If you’re Pixilated We have seen pixilated pictures of all formats, blurred chunks of text or obscured faces and license plates show up on the news, in the redacted documents, and online. Researchers at the University of Texas at Austin and Cornell Tech say that they’ve trained a piece of software that can undermine the privacy benefits of standard content-masking techniques like blurring and pixilation by learning to read or see what’s meant to be hidden in images—anything from a blurred house number to a pixilated human face in the background of a photo. The researchers were able to defeat three privacy protection technologies. Finally, they used obfuscated test images that the neural networks hadn’t yet been exposed to in any form to see whether the image recognition could identify faces, objects, and handwritten numbers. Sales force is betting its Einstein AI will make CRM better If there was any doubt that AI has officially arrived in the world of enterprise software, Sales force just put it to rest. The CRM giant on Sunday announced Einstein, a set of artificial intelligence capabilities it says will help users of its platform serve their customers better. It's putting Einstein's capabilities into all its clouds, bringing machine learning, deep learning, predictive analytics, and natural language processing into each piece of its CRM platform. Indeed, predictive analytics has been an increasingly significant part of the marketer's toolbox for some time, and vendors including Pega Systems have been applying such capabilities to CRM. Also on Sunday, Sales force announced a new research group focused on delivering deep learning, natural language processing, and computer vision to Sales force’s product and engineering teams. Google Analytics just got a new AI tool to help find insights faster Services like Google Analytics are great for amassing key data to help you make the most of your web efforts, but zeroing in on the parts that matter most can be a time-consuming challenge. On Friday, Google added a new feature to its analytics service that taps AI to surface insights automatically. If you're a retailer trying to get ready for the holiday season, for instance, the tool can instantaneously surface opportunities and anomalies hiding in your data, such as which products are experiencing
higher-than-normal
sales
growth,
which
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advertising channels are driving the most conversions and the best returns, and what devices customers are using to engage with your brand. The new automated insights feature is now available with the official Google Analytics mobile app on Android and iOS for English-speaking users. Google's now working on bringing it to the web version of the software and to other languages as well. U.S. Wants Makers of Driverless Cars to Prove They Are Safe [7] The U.S. government has issued its first rules for automated vehicles. They include a 15-point set of “safety assessment� guidelines for self-driving systems. These cover issues such as cyber security, black-box recordings to aid crash investigations, and potential ethical conundrums on the road. The new policy will play a central role in shaping how autonomous vehicles proceed toward commercial use. Many automotive and technology companies are testing self-driving vehicles, and ride-hailing company Uber even lets customers in Pittsburgh order rides in prototypes. U.S. Secretary of Transportation Anthony Foxx said today that the new policies would also apply to cars already on the road. -Maheshwaran PGDM-B (2016-18)
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Curiosity Updates September 2016 NASA Flight Program Tests Mars Lander Vision System [8] NASA tested new "eyes" for its next Mars rover mission on a rocket built by Masten Space Systems in Mojave, California, thanks in part to NASA's Flight Opportunities Program, or FOP. The agency's Jet Propulsion Laboratory in Pasadena, California, is leading development of the Mars 2020 rover and its Lander Vision System, or LVS. In 2014, the prototype vision system launched 1,066 feet (325 meters) into the air aboard Masten's rocket-powered "Xombie" test platform and helped guide the rocket to a precise landing at a predesignated target. LVS flew as part of a larger system of experimental landing technologies called the Autonomous Descent and Ascent Powered-flight Testbed, or ADAPT. LVS, a camera-based navigation system, photographs the terrain beneath a descending spacecraft and matches it with onboard maps allowing the craft to detect its location relative to landing hazards, such as boulders and outcroppings. The system can then direct the craft toward a safe landing at its primary target site or divert touchdown toward better terrain if there are hazards in the approaching target area. Image matching is aided by an inertial measurement unit that monitors orientation. NASA's Curiosity Rover Begins Next Mars Chapter [9] After collecting drilled rock powder in arguably the most scenic landscape yet visited by a Mars rover, NASA's Curiosity mobile laboratory is driving toward uphill destinations as part of its two-year mission extension that commenced Oct. 1. The destinations include a ridge capped with material rich in the iron-oxide mineral hematite, about a mile-and-a-half (two-and-a-half kilometers) ahead, and an exposure of clay-rich bedrock beyond that. These are key exploration sites on lower Mount Sharp, which is a layered, Mount-Rainier-size mound where Curiosity is investigating evidence of ancient, water-rich environments that contrast with the harsh, dry conditions on the surface of Mars today.
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Hubble: Possible Water Plumes on Jupiter's Moon Europa
This composite image shows suspected plumes of water vapour erupting at the 7 o'clock position off the limb of Jupiter's moon Europa. The plumes, photographed by NASA's Hubble's Space Telescope Imaging Spectrograph, were seen in silhouette as the moon passed in front of Jupiter. Credits: NASA/ESA/W. Sparks (STScI)/USGS Astrogeology Science Centre Astronomers using NASA's Hubble Space Telescope has imaged what may be water vapour plumes erupting off the surface of Jupiter's moon Europa. This finding bolsters other Hubble observations suggesting the icy moon erupts with high altitude water vaporplumes.The observation increases the possibility that missions to Europa may be able to sample Europa's ocean without having to drill through miles of ice. -Arunava Dey PGDM-FS (2016-18)
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Quant Fun September 2016
QUANTFUN 1. B 2. B 3. B 4. A 5. D 6. C 7. A 8. A 9. D 10. D Rack Your Brains withQ.1. While speaking to a lady, Bala said “You are the mother of the daughter of the only son of the wife of the father of my sister's father”. How is the lady related to Bala? [A] Mother [B] Aunt [C) Sister [D] None of these. Q.2. Find the single discount equivalent to a series of successive discounts of 20%, 30% and 50%. [A] 67% [B] 72% [C] 81% [D] 54% Q.3. If selling [A] 66 2/3
price is doubled, [B] 100
the profit triples. Find the [C] 105 1/3 [D] 120
profit
percent.
Q.4. The Federal Reserve tried to stir interest among policy makers in the problems afflicting the housing market by sending a white paper to Congress outlining suggestions for easing those problems. The Reserve is concerned that the collapse of mortgage lending during the financial crisis is hardening into “a potentially long-term downshift in the supply of mortgage credit.” One reason for this, the paper says, is that Fannie and Freddie, which provide the money for most mortgage loans, are scaring lenders by aggressively seeking refunds on defaulted loans. Which of the following, if true, justifies the concerns of The Federal Reserve? 1. The ways employed by Fannie and Freddie are discouraging lenders from originating new loans. 2. The methods used by Fannie and Freddie are helping them in maximizing their profits on old business. [A] Both 1 and 2 [B] Only 2 [C] Only 1 [D] Neither 1 Q.5. Distance between two points P and Q is 1200meters. Car A starts from P and travels ona straight line at a speed of 15m/s to reach Q. Then, it reverses its direction immediately to
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travel back to P. If car B starts from P towards Q, four seconds later than car A at a speed of 10m/s, what distance from Q will these two cars meet? [A] 936 m [B] 991 m [C] 264 m [D] 209 m
Q.6. Find the ratio in which wheat of inferior quality (Rs.14/kg) be mixed with wheat of superior quality (Rs.28/kg) so that the shopkeeper gains Rs.2 by selling the resulting mixture at Rs.20/kg. [A] 1:3 [B] 5:2 [C] 3:4 [D] 2:5
Q.7.A tyre has two punctures. The first puncture alone would have made the tyre flat in 9 minutes and the second alone would have done it in 6 minutes. If air leaks out at a constant rate, how long does it take both the punctures together to make it flat? [A] 3 1/5 min [B] 3 2/5 min [C] 3 3/5 min [D] 3 4/5 min Q.8. On buying a camera, the shopkeeper gives three rolls of film free. On buying a camera and six rolls of film, the shopkeeper gives additional four rolls of film free. If the equivalent discount is the same in both cases, then how many rolls will be equal in value to a camera? [A] 12 [B] 15 [C] 18 [D] 24
Q.9. Tanya is older than Eric. Cliff is older than Tanya. Eric is older than Cliff. If the first two statements are true, the third statement is [A]True [B] False [C] Uncertain [D] Certain Q.10. The cost price of 20 articles is the same as the selling price of x articles. If the profit is 25%, then the value of x is: [A] 15 [B] 16 [C] 18 [D] 25
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References 1. http://www.forbes.com/sites/jacobmorgan/2014/05/13/simple-explanation-internetthings-that-anyone-can-understand/#6529e9b26828 2. https://en.wikipedia.org/wiki/Fitbit 3. https://en.wikipedia.org/wiki/Bh%C4%81skara_II 4. https://www.wired.com/2016/09/machine-learning-can-identify-pixelated-faces-researchersshow/ 5. http://www.pcworld.com/article/3121343/salesforce-is-betting-its-einstein-ai-will-make-crmbetter.html 6. http://www.pcworld.com/article/3116074/google-analytics-just-got-a-new-ai-tool-to-help-findinsights-faster.html 7. https://www.technologyreview.com/s/602420/us-wants-makers-of-driverless-cars-to-provethey-are-safe/ 8. http://phys.org/news/2016-10-nasa-flight-mars-lander-vision.html 9. http://www.jpl.nasa.gov/news/news.php?feature=6632 10. http://indianexpress.com/article/technology/science/nasas-hubble-telescope-spots-possiblewater-plumes-on-jupiters-moon-europa/
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Quant Connect August 2016 Quantinuum, the Quant forum of KJ Somaiya Institute of Management Studies and Research aims to empower students and professionals alike to organize and understand numbers and, in turn, to make good and rational decisions as future managers. The newsletter published monthly consists of a gamut of articles for readers ranging from beginners to advanced learners so as to further enrich the young minds understand the contributions made to the field of mathematics along with a couple of brain- racking sections of Sudoku to tickle the gray cells. For any further queries and feedback, please contact the following address: KJ Somaiya Institute of Management Studies and Research, Vidya Nagar, VidyaVihar, Ghatkopar East, Mumbai -400077 Mentor Prof. N.S.Nilakantan (+919820680741) – Email – nilakantan@somaiya.edu
TEAM LEADERS Team Leaders
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