Jason Zweig’s The Devil’s Financial Dictionary (PublicAffairs, 2015) is a book that probably every reader wishes he had been clever enough to write. Following in the satiric tradition of Ambrose Bierce (The Devil’s Dictionary, 1906), Zweig has compiled a marvelously witty set of definitions and explanations of financial jargon. Part exposé, part elucidation, it is almost always savagely amusing.
“QUANT, n. A trader or investor who relies primarily or exclusively on computer software and mathematical formulas without the noisy distractions of human judgment. The results, of course, can only be as good or bad as the judgment of the human who designed the computer software and the mathematical formulas.” (p. 142)
“VOLATILITY, n. The extent to which an investment’s short-term returns differ from its long-term average returns, technically known as standard deviation and colloquially known as Oh my God!” (p. 179)
HEAD AND SHOULDERS, n. A purported pattern in TECHNICAL ANALYSIS in which the price of a stock or other asset bounces up a little, down a little, up a lot, down a lot, up a little, then down a little—which is supposed to mean a lot about how the price will move in the future. If that reminds you of the lyrics to the children’s song,
??Eyes and ears and mouth and nose,
??Head, shoulders, knees and toes, knees and toes,
you might well be right, but you have no future as a technical analyst.” (p. 91)