Matt Levine can go on vacation without worrying.
Levine, arguably the best financial columnist today, often worries he can’t take a break without missing swooning markets, failing banks or anything Elon Musk does.
On a daily basis he takes apart the big issues in an insanely long column he writes for Bloomberg called Money Stuff. (The last post was almost 6,000 words.)
However, a tongue-in-cheek academic publication by two PhD students and a Chartered Financial Analyst, shows no correlation between Levine’s vacation schedule and market volatility.
The trio compiled data including Money Stuff publication dates, the VIX volatility index, federal bank holidays and sunspot occurrences to produce this formula:
V IXt = β0 ∗ V IXt−1 + β1 ∗ 1 [off day] × 1 [trading day] + β2 ∗ 1 [holiday week] + t
The inclusion of sunspot data is a nod to a 1876 paper published by W. Stanley Jevons that explored the connection between solar activity and business cycles.
The authors cite that paper as among the first in a “collection of studies that examine spurious statistical correlates of important macroeconomic events.”
Other dubious studies include the “profitability of stock market prediction strategies based on Super Bowl winners” and also “abnormal surplus returns to Punxsutawney Phil-based investment strategies.”
“Our paper adds to this literature by selecting a particular potential correlate – Matt Levine’s vacation schedule – that is of interest to many followers of financial markets, but is neither a celestial body, a sporting event, nor a Pennsylvanian rodent.”
The lack of impact can be explained thusly: “CEOs, CFOs, corporate lawyers, grad students who post on investment subreddits and other financial big shots may themselves experience lower productivity, suffer from lower motivation, and undergo a general languor without having Levine’s lunchtime-adjacent fillip enter their inbox.”
I was excited to realize I had played an incidental role in the saga because I was the one who suggested Bloomberg Opinion editors publish Levine in the middle of the day, arguing he would make a bigger splash.
One reason Levine is so good is he combines journalism, banking and legal expertise. Before joining Bloomberg, he was an editor at Dealbreaker, a banker at Goldman Sachs, a mergers and acquisitions lawyer at Wachtell, Lipton, Rosen & Katz, and a clerk for the U.S. Court of Appeals for the 3rd Circuit.
My favorite part of the paper is the obligatory section explaining the origin of the data. The authors note the observations are limited to nine months because that’s their “electronic mail service provider’s file retention limit for un-starred emails.”
The three authors — Paul Connell, William Fallon and Nick Foretek — made clear in the paper that the research in no way distracted from the work they were doing on their dissertations during Spring Break.
Given the magnitude of the effort they put in, they deserve some time off too.
H/t to Morning Brew for first mentioning the paper.