What type of job were you interviewin for? and what type of firm? For example, at a bank prop desk I doubt they would care about the loss of investor capital due to redemptions.
It was a traditional invstmntmgmt place (think AllianceBernstein, BlackRock, Fidelity, etc.) - the PM managed a global equity book (value iirc) and it was an entry level associate role. The irony of it is at the time they were only a few months away from such a drawdown. Though, afaik, these kinds of drawdowns happen and aren't too detrimental given the nature of that business.
Something just occurred to me: Why settle for a pairs trading system? Why not a trio or a quartet? I mean the logic is so simple. Even a beauone head should be able to understand this. Of course, it would help if you had a minor in math and a completed CFA 1, but I'm certain the small people on ET can understand this. By the way, the WORLD IS FLAT! THE WORLD IS FLAT! THE WORLD IS FLAT! I know this! I proved it with my degree in Math! Come on little people on ET, just google it! Its right there for you to see!
I am not wrong. It's common sense. Obviously with a little amount it won't matter, but if your managing a big portfolio it's a big difference
would you rather A) gain 20% for 4yrs and then lose 50% in the fifth or B) lose 50% in the first year and gain 20% for the remaining four years. ......................................... being married at the time, it would depend on what she looked like. margin requirements, investor confidence, 2 and 20% / maint. fees also come into play..... s
God no.... 720 X 20% = 864 ??? Sure, use X * 1.2 instead of: X[1] = X[0] + (20% * X[0]) for clarity..? Third times a charm!
Bwolinsky's mistake is a good example of the dangerous of intuitive thinking. He looks at the problem and immediately thinks "must be a trick question." He's been studying a lot of CFA material recently, and thinks, ah, must be an issue of compounding. This leads him to a biased, intuitive conclusion that one result must be greater than the other, and he creates a flawed mathematical formula to prove it, not realizing that dividing by 1.5 does not equal a 50% loss. Irony is that most middle school math students probably would be able to tell that the two scenarios produce equal results.
Nonsense. Your ego got in the way. "I'm a CFA canidate!!! (Nobody else knows but me)" mentalty. You overlooked the obvious because you were being an arrogant know it all.