More than Money (and Great Credit Scores)

When I was in college I defined my success by grades.  When I entered the working world I largely defined my success largely by my job and my finances. I used to love my work (electrical engineering/computer science) but after several years I found I had a high-paying but unsatisfying job.

I went back to school and earned a Master’s Degree in finance.  I earned a 4.o and really enjoyed returning to college.  After graduating, I was honored to be offered an adjunct professorship in Finance.  The pros of this job are satisfaction, autonomy, and the opportunity to help students learn complex tops.  The cons are underemployment and relatively low pay and no benefits.

So my three-legged stool of financial success is off balance: I still have great retirement savings, a great credit score, and mediocre earnings. This has shaken my self esteem.  Even though teaching at a major university is a cool and prestigious job, frankly I miss the money.  My wife and are or doing OK financially, she has here own company with its ups and downs, and we also have a rental property that provides some additional income.

We have no debt except for a mortgage.  If it wasn’t for the mortgage, I’d feel a  lot more comfortable. I used to own my own home (before I got married), but my wife wanted a better home.  That gave us a new mortgage. Bummer.

My wife and I are learning to be more frugal.  For me this a slow, tough adjustment.  Since my work is currently part-time, I also have to find inexpensive ways to occupy my free time (like blogging:).

The really tough adjustment is adjusting to underemployment.  I do important work and am trying to convince myself to value that more strongly.  My wife and I have a loving marriage, and that is something to be proud of — it takes work!  I have been working on my diet and exercise, and am much healthier than in my old engineering job — the benefits of more free time.

My learning is that defining yourself mostly by money and finances is a bad idea.  We humans are so much more than our jobs. We can be good spouses, loving pet owners, dreamers, experimenters, hobbyists, friends, and many other things.  My view has been too narrow, but I’m working on it.  There is so much more to life than jobs and money!

 

 

Quant Logic Tackles Sloppy Betas in Finance. (Part II)

I’ve crunched my first set of numbers.  Specifically I’ve computed the beta of  XOM (Exxon Mobil) vs. SPY (SPDR S&P 500 ETF) for 365 days ending Feb 4, 2010.   My computed beta is 0.125.   This is based on daily sampling of closing prices for a 365-day period.   Not content with non-uniform sampling (e.g. discarding holiday and weekend data when the markets are not open), I recomputed beta over the same period with interpolated weekend/holiday data and came up with a beta of 0.117.  I have not yet bothered to compute R-squared.

These are surprisingly low betas.  Also interesting is the difference data interpolation can make… a not insignificant difference of 8.6%

Next I checked out reported betas from other sources.  Yahoo Finance reports a beta of 0.35 for XOM (without specifying a time period, sampling method/frequency, or even reference index).   MSN Money reports a beta of 0.43.   This is a difference of about 23%.  This could probably be accounted for by different time periods, etc.  But what is most annoying is that these betas are presented without any such context.

I’ve only just started to explore this topic, but I think I’ve started to show that there is significant room for improvement in computing beta.  And because beta underlies CAPM and modern portfolio theory, I think this is a big deal.

I’ve already got some more ideas for part III of this series, I just have to crunch some more numbers.