garvia.es

Session 5 – Recap for Students

General notes

Key ideas from class

1. Obsidian + Markdown

2. Finance = Managing an uncertain future

3. Central banks & context

4. Information levels & EMH

5. Arbitrage = the name of the game

Takeaways

Prep for next class

  1. Read: Fama (1970) abstract on EMH → know weak, semi-strong, strong forms.

  2. Write 3–5 bullet notes on: technical vs. fundamental analysis, EMH levels, why insider trading is illegal.

  3. Optional but recommended: try Obsidian and save your notes in Markdown.

📌 Next session:

👉 Bottom line: Arbitrage, information, and efficiency are the core loop of financial markets.

Transcript

Perfect. Hey.
Took week.
Obsidian, let me share with you.
Obsidian every because obsidian is like a language, you know the programming language, but it’s something that.
First time you approach to Obsidian, you will not understand what how this work, how you should use a little bit it in order to get used to it. It’s like a file administration, a file manager, but instead of.
Using docs that in order to open and close a doc use you wait for ages. This work plain text file. This work with plain text files that are like post-its. Imagine that you have a folder where you can folder a system where you can.
Play with Post-its. You can, for example, I have a script that everything that I publish in LinkedIn goes quickly into my obsidian and you can just upload it to into chat DPP all these things.
Let me just quick, quick, quick.
Call.
Where you? No, sorry in Calgary.
Obsidian is a.
Forward in order to share no to share no to manage formation files.
What is the problem with ChatDPT that you can use it, but once you have get the information, if you are looking for something that you wrote or you asked ChatDPT 30 years, 30 days ago, there is a lot of information and it does not get file storage in a northern way.
Yes.
Do I have to share with you?
Do I have share with you this this agenda?
For me it’s great because I don’t need to upload water.
Tell me a brief summary regarding of obsidian and in the form format for.
My international students.
And also, where are you? You are here. Let me share with you contact.
DB.
This is OK. Obsidian is a powerful premier.
We got a finance. These are you.
Obsidian is a powerful note. I was talking. I talked with you about black swans and Richard Tyler. I use it or not. I don’t know. I don’t remember in short of see here you you have information regarding obsidian in short obsidian plus markdown is a powerful local and customizable way to.
Organize your knowledge. Yep, once I’m here also.
Tell them also about the power of open source.
And.
Give me a bands, bands is written in this sense, bands, bands of examples of power tools.
In an schematic way ordered by teams.
With links, yes. Anyone knows what prompting is prompt? All of you know what is prompting? Have you had someone at university that told you about prompting?
University OK, all of you know why it’s from people.
What I have done, this is a problem.
First thing regard, I don’t know is how to be context to this because this is in a I don’t know who to deal with this one really would. But whatever in this message there is context, there is what I’m asking for and there is how I want the resource to be given, yes.
I have us, yes, we need.
Witness.
When I’m going, when I.
Let me see the result here.
Oh.
OK.
No, I don’t like. I don’t like this. I’m not going to share this one with you. Open source. I’m going to. I’m going to look for it and I’m going to say open source.
Free software that is developed by the open source community and it’s so powerful software that will help you with video editing, with AI, with whatever you need to do regarding software, it’s free.
It’s open to all users and I strongly recommend you to know about open source because it’s like having an incredible big set of tools.
But I don’t like I have another one better. Let me look if I can look for here quickly and if I cannot do it in one minute.
Yeah, I think, yes, Obsidian.
here.
OK, let me start with the class. Please anyone please, please, he said. He said. Can you send me a WhatsApp? They’re saying open source.
Because I want to share with you a set of links and I don’t want to forget. I’m sorry for telling you to send links. Sorry.
OK, this day is important. We will try to finish by the third. I don’t know if you have more exams and I don’t really care.
OK. Hey.
Hey.
I have students from Chicago. We’re from Chicago. Great. Only you. You were more, I think. Oh, you too.
Personally, I love this man.
And I’m looking for his.
Yeah, it is.
Yeah, here, so happy. There are things that I have been years in order to get this.
Oh, this is my wife and he’s her.
I’m a young key, yes, and once I once I start with a GPT, I cannot stop. Tell me about 2013 novel.
Fama and Sheila.
I’m Sheila.
It’s not contradictory. It’s not contradictory. Let me play with this problem. Careful. If I ask this to a human being, probably the human being will not understand.
What I’m asking for as a DPT, I think that he will understand because contradiction is something that he will look and I know that it has been contradictory and not only he will look for the contradiction, but also he will explain me what I want to explain you, yes.
I love Nobel Prize histories. I love Stockholm and I love risk banking. Why do I love all these things? Because regarding economics history, you can make lot of.
During this semester, the economics Nobel Prize will be given. We will talk about this and on that class, same today we have talked about Powell. On that class we will talk about last prices. This is a great question. Thanks. I love you too. And yes.
It’s famous exactly because it’s oh, sorry.
You are now I am full of joy. I would like you to share the joy with me, but if you are somewhere else, I’m feeling sorry for you.
No, I’m not. I’m not.
Happy because you are there, because you are not here. I’m happy because I’m happy because you know you are with me at least. No, I have asked about control and you.
Sorry, let me share this with you when we are and.
And Hanson that has to do with the statistics. Sorry, he was an economic econometrics.
Here, here.
Yeah, my wife having. OK, I need your attention.
If you don’t share, no, no, no. Your attention in 2 minutes, yes. If you don’t share my joy, my joy, my joy is correct. If you don’t say my joy with me in this instant, it’s not my problem. It’s yours.
And I think it’s a problem, but but I don’t care. It has to do with generator, whatever. You can be whatever you want. Once I have said this, I need your attention. Please, your whole attention. Finance information, risk. Can you play the future?
Oh, can you manage it? Yes. Oh, oh, oh, oh.
Who said that?
Say data. Oh, so sorry, I’m not. I’m not gonna ask again. I’m.
Yeah.
Information. That is data, but what is the difference between data and information? Information is being given in a more ordered way. Data is everything and information is from that they give what matters.
What do I have to talk about today? What is the main idea you should take from my class?
I don’t want it tomorrow.
And I have.
I probably you have something. You will remember it. You will remember it. I’m talking about behavioral. I’m talking about that you are not human, rational humans, rational investors, no.
Oh, you are not gasp racial. You are your your brain came from. Your brain came from.
I mean all, all, all over a magnet that are there that has emotions. We go in an automatic way. Yes, I’m talking about behavioural finance that is here that received a novel together we have.
And now I’m talking about Fama. I’m talking about that Chicago’s professor. I’m talking about Elgi Fama, yes.
Today’s class, I have talked about Deon Powell. I have talked about the Adepo Aguilera. Anyone know who is Adepo Aguilera?
Do you know who is Hunter Pagliera? You, you Hunter Pagliera? I mean what is Hunter Pagliera? Sorry, do you know what is?
Yes, yes. You’re going to be this name important for you engineers today. It’s it’s interesting knowing it’s required.
I have talked about you see that I have talked about a lot of things. Yes, in terms of data, in terms of data, I’m pointing to my recording in points in terms of data.
Careful, because there’s a lot of noise. There’s a lot of noise. What is information taking among all these noise? Important things. Do I have to talk today about something?
Else than information, I have talked a lot about information, but also I have talked about power. I talked about power in last class, last before. I have talked in all my classes about monetary policy. I have talked about central banks.
Since the first day. So also also you could think that central banks is important and important for this also.
Do I have to talk about managing the future? Do I have to talk about finance and instruments? Do I have to talk about China? Do I have to talk about Korea, about Europe, about France? Yes.
Do you see that managing information is core is absolutely important for me for my for finance? I’m just doing this because I I don’t think I enjoy what I do.
OK, information. Let me do I have all your attention. Information matters. Information is important. Once I have said this, I want your attention. I know that it’s a gap of one minute. I don’t want to spend that. Why is information? What is information? We are going to do three different levels.
What is information? Anyone? Catherine, what is information regarding markets regarding finances?
What is information?
Like market trends, maybe, right. Let me call it historical prices information. We can look at historical prices.
What was Apple’s price yesterday? What was Apple’s price before yesterday? Yep, Historical prices.
And I’m going to please, I need your attention now for this question. I’m going to repeat this question three more times or more than three, but three different times.
And it’s not it’s it’s a a tricky question. Can we predict the future by looking historical prices? Can we predict the future by looking historical prices?
Can we? It depends. It depends.
It depends.

  1. And.
    If there is a market inefficiency.
    If there is a market inefficiency, we can, we can do it. We can do it. If there is an inefficiency, the inefficiency means that you can take advantage of historical prices, so you can have.
    You can make arbitrage, you can have a freelance, you can predict the future, you can get a game without assuming risk.
    And please, due to your action, markets stems with efficiency and you cannot predict the future. You see what I mean or not?
    I’m gonna repeat the ideas.
    Can we predict the future by looking historical places? Can we predict the future by looking? If we can, if we can, we can make arbitrage and because we are making arbitrage.
    Markets tends to efficient and because markets tends to efficient, all these opportunities disappear and you cannot make sense.
    You have understood what I have said. I’m going to repeat it from different ways, but what I’m saying is important for this course and for understanding finance.
    Are there people that pass the whole day by looking trends, by analyzing things? Are there people doing this kind of analysis or do we call people that do this kind of analysis?
    It.
    Annalise.
    I mean.
    OK.
    Yes.
    No one. Let me Google one word.
    Technical analysis. Technical analysis. Let me Google this and look what I get in emails. Let me look what I get. Have you ever seen this kind of graphs?
    Have you ever seen these kind of graphs?
    Yes. Have you ever seen this kind of rats? What is this? What is this? What is this?
    This is technical analysis. What is technical analysis? What is technical analysis? Right to the future by looking historical trends. What is your data? What data you use in technical analysis?
    There you got prices.
    Technical analysis works or not? Does it work or not?
    Yeah, but thanks, thanks to technical analysis work. Technical analysis doesn’t work.
    Thanks to it works, markets tends to efficiency and markets tends to efficiency.
    Technical analysis does not work because markets are efficient in the what we call the weak form. This is the weak form.
    Weak forms of the market.
    Hypothesis.
    Sorry, of the efficient market hypothesis, yes.
    ENH, yes, this is the week form. What is the week form? Historical prices that has to do with let me count.
    This is the week form. What is the question I have asked you? Yes, after saying I told you, please send your attention. This is very important and important in this information. Not only I say that information I hit, I hit the wall in order to get your attention. Information is important. And after that, after saying that, what else did I tell you?
    And what is information? What is information? First level historical prices? Yes, can we have more information than historical prices?
    What else can we have?
    What is?
    Yes, why doesn’t that happen?
    News piece of new, a piece of new from the company. What else can we have? I was looking for that. I was looking for for accounting information. You can take the books of the company and analyze it.
    That you can calculate by the books that’s close. You can look the earnings, look forecast close and see what is the value of the company books and compare this with the market, yes.
    What kind of analysis is this? What kind of investing is this? Who do this?
    We can do, but I’m thinking about one person older than 90. Yeah.
    Longer. Charlie. Longer. That’s the way I’m thinking about Warren Buffet. Warren Buffet is rich. Yes, it’s easy to get rich like Warren Buffet. No, no.
    Yeah.
    Let me call me second level or.
    Public information, Yes, all public information. I’m saying I have written here technical analysis. It goes fundamental. Have you ever heard of fundamental analysis?
    Or also you have heard about value investing, value investing. Have you heard of value investing?
    Value investing. If you have not heard about this, today’s the day you learn this exist and this would be us, yes.
    This would be yes.
    That’s fundamental analysis work. That’s value investing work and you make money through value investing. Yes, you can, but because it works, it’s harder to do it. No one will be doing this.
    Think about polymarket. What I have told you that you can go into polymarket and make money by doing arbitrage. And I have told you that this looks like a baby. Why? Because there is a big gap.
    You do this, but in size you are getting a freelance. Careful because when we talk about blockchain you should consider also the Commission the piece and probably the the piece are the ones that.
    Tells you that 92% is you should assume that there are no treating people and if there is this gap probably will be because of the fees. Makes sense. Polymarket is charging the fees.
    Fundamental analysis. Fundamental analysis works or not? You know that the answer is it depends, but because it works, markets stand efficient.
    Yes.
    OK, there is one third level. No, I thought about this. Historical prices form part of public information. Among all public information there are historical prices. This is the semi strong form. Semi strong form, yes.
    Jamie Strong for.
    I have all public information, but there is a third level, no?
    Is there any more information?
    And if you hear private information, what you should think about in an immediate way? I think of like satellites and stuff.
    I’m sorry. I’m sorry we can be arguing, but I was. I want to see instant reaction information.
    Selling sorting, selling sorting. How can you survive by and this is something that if either a race go up, what is going to happen with race of both? It will go down. This should go in an automatic way.
    Why? Because you know about times, you know about present value formula and you know that this stuff makes sense.
    So the third level has to do with.
    Private information, yes.
    And this needs to be sighted, yes.
    Careful, because what is the difference between technical analysis, fundamental analysis and working with inside information?
    What is the difference with doing technical analysis, doing fundamental analysis or doing business with insight information? What is the difference? Is there any difference?
    No, this is not very good.
    You can go to jail. Yes, yes.
    Can you? Can you drunk? Yes. Can you drive? Yes. Is drunk allowed to drunk in Spanish? Is driving allowed? Yes. Can you?
    Drank while driving. You can, but if you do and you are caught, you can go and focus. And from my point of view, what is worse is that you can kill someone.
    Yeah, I’m not talking now about the dish. I’m not talking now about the dish with my Italian true best. I will be talking more about the dish. Now I’m talking about the Italian. Last day of pleasure. You did a game.
    First day plus I was talking about the difference between legality and in this case what I’m saying is that.
    Legal. Legal crime.
    Investing with *, **.
    And what can you do? I mean if you.
    Use these two hypotheses. You use that two hypotheses. What can you do? What can you make? Yes, you can make one.
    But let me talk. Let me start by the end. This is the price of the stock, yes.
    In time, yes.
    And this is the date of an announcement.
    The markets are efficient in the strong way.
    What is going to happen after the announcement with the with the information? Yes, there are with the information. What is going to happen after?
    We’ll go down. We’ll go up, yes.
    What if there is an over reaction before?
    Announcement. We will see it in the market. We Who else will see? Who else will see this SEC?
    SEC will see, will say, oh, new information here. Oh, the day before this person has bought. Let me check who is this person. Oh, this person is the neighbor of the CEO.
    This is the point. I’m not saying that markets are efficient or not. I am saying that thanks to inefficiencies or thanks to overreaction before time, you can see, yeah.
    For example, these two guys now and these two guys are talking, more people talking.
    Can I throw them out of the glass?
    I throw them out of the glass.
    I’m just wondering why. No, no, no, no, no, don’t. Let me just one minute and just with a gun pointing to your head. You cannot move.
    Use the coin. Can I throw you out of the glass? I don’t know what you are doing, but can I throw you out? No, I don’t have any reason in order to what I’m saying is that thanks for your reaction, the supervisor, you are talking.
    I just don’t care. I was your question.
    I’m talking about legal prosecution and all these things there. I was just wondering why exactly it’s inside the people. Like I know you can make a lot of money doing it, but because you have information.
    And you have you are in a in a better position than you rest. If you have information, it’s because you have to do with the see with the manager, with the managing team of the company. Managers should focus in their business, not in markets.
    Markets are efficient. Sorry, markets are not efficient. I haven’t said that, but markets send to efficiency. Unless you should look for efficiency and efficiency has to do that. Nobody make poker. What do you say? Nobody knows the cars from the other one.
    You cannot make a salt almost in the trampas, trampas, tricks, tricks, tricks. You cannot make tricks, you cannot see.
    You are asking me, Luis, you are asking me in the exam. I would knowledge and I have all this knowledge in that and you have told me that obsidian exists. Why can I? What can I do in the exam?
    Because I want to test your knowledge because the system doesn’t work as it were, because these are the rules, because markets, because thanks to efficiency, markets are thanks to efficiency, markets are liquid and we don’t think if someone.
    Playing with inside the provision. We trust each other and why we trust that no one is playing with the inside the provision.
    Because it’s illegal. If someone will be happy with with the same information, I am not working the company in order to invest. Should I know someone in other? This is not fair. I want to invest in the same condition that everyone.
    I says I really, really appreciate your question.
    Yes, the the other three go out of the no, no, no, I really appreciate the question talking absolutely serious.
    OK, 5 minutes. Oh, no, I get nervous.
    I’m getting nervous. Oh yeah, please.
    I will like.
    I will like.
    Thank you.
    I have, Sir, this with you.
    I would like you to read at least.
    I’ve served this with you here. Yes, this is the this is the paper.
    But because I know that you are not going to or most of you will not be.
    OK.
    Market. A market in which prices provide accurate signals for resource information. A market in which firms can provide a market price here, here, oh, sorry.
    Because I’m running out of time, a marketing which prices always fully reflect our available information is gone. Don’t you see that this is what I was?
    A market in which prices always fully reflectable information is coefficient. Yes, this paper reviews the theoretical after first first weak form test in which the information set is just historical prices.
    Discussion then semi strong form test in which the concern is with their prices of public information. Later strong form test concerned with whether given information or groups of have monopolistic access to an information revenue.
    Yes.
    That’s technical analysis. Exist. Technical analysis. Exist. Analysis. Exist.
    That’s where buffet exists. Yes, these people training with redesigned information. No money, no. But what I want to tell you is that the official market hypothesis is not.
    It’s not. It’s not that statistic. Sorry, it’s not that statistic. I focus. It’s a dynamic. One minute to me. I know that we finish at 12. I’m not going to repeat what I did last Wednesday. Sorry.
    I did last Wednesday. Sorry, sorry. And I’m gonna stick a minute.
    I will try to this to be less than one minute. I will try to finish some time, but with one minute I don’t know. You see that here is written what I have just told you know.
    Now, what is Harvey Trudge? A freelance? Yes, a freelance. And he’s there here. I want to tell you this history. So quick. You know, Rochil. Have you ever heard that word? Rochil, my French student.
    And move with the roadside, roadside.
    American citizens rushing outside. There are two. In fact, there were there were one like Yuma and Adidas. This is a known story. Water law. Water law.
    Was a war that took place in Belgium. Yes, after the allies won Napoleon. Yes, one person took a horse and with his information arrived to London the.
    Days before the Royal, you understand what I’m saying? He took the fastest source and arrived in three days before what he did playing with that information regarding the war was war.
    What I’m saying that yeah, 8050 in the in the 80508050 arbitrage has to do with this information with this.
    If you have, if you have the information regarding how the work is be days before the rest of the people, you will make money and he did and let me go back in time.
    And this is a lovely, lovely story. I’m not going to go through the story, but has to do, you know, Chicago more or less, you know, all of you know where is Chicago. If you don’t know, look, take a look. It’s more or less in the center. Yes, NASDAQ.
    New York. There was a fiber of the cable between NASA and between NASA and between NASA and Chicago. They are one place. There were four crazy people that asked for 400 million in order to.
    Put this fiber optic cable through the mountains instead of taking those straighter. Yes, they with these projects they were gonna instead of 17 milliseconds they are they were gonna make this connection in 30s.
    One, three milliseconds. So they were going to get 4 milliseconds. They were going to go. They were going to get information 4 milliseconds sooner. You see what I’m saying? They were going to spend more than I don’t know that.
    $300 million in order to get 4 milliseconds. There is a thing, there is a book. At the end they got the monies and they start to win hypercursive trading and they got.
    Much more. Thanks to these four milliseconds, they got much more than 300 million. Do you see what I mean? But I’m talking here. I’m talking about tardy crap. You need time. How much?
    Depends. Do you have information that no one else have? Can we call it inside the information? Unnecessary. Can we go from that information that no one else have?
    I I’m showing you and because why I’m taking one minute or two more.
    Because I want you to see and to know that the name of the game in finance.
    This, this is the name of the game arbitracks, place information and you can you can try to make money. You will put your back in order to make money or if you are a bank you you can try to manage risk.
    It’s the same name, same name from a leader perspective. Yes, we are done. Thank you. Thank you. Welcome. Thank you. Welcome, welcome, welcome.