In my 20 years of option market-making, trading, and portfolio management I’ve been fortunate to meet many talented risk-takers. I took the opportunity to ask some of them what the most influential books or papers they have read in their careers.
I asked a cohort of 25 investors. They are CIO’s, PMs, and independent investors whose livelihood depend on the bets they take. Half of the respondents have had an options focus and more than 80% would be classified as quantitative. That word is a bit nebulous so my own clarification would be “non-bottoms-up”.
Let’s jump in.
The Most Influential
Topics: Risk/Reward
Nassim Taleb
Agustin Lebron: The Laws of Trading (Link)
Peter Thiel: Zero to One (Link)
Aaron Brown: Red Blooded Risk (Link)
Peter L Bernstein: Against the Gods (Link)
Howard Marks
David Sklansky
Topic: Process to Extract Edge
AQR research
- Expected Returns by Antti Ilmanen (Link)
“The Bible”. “Don’t tell others”
- Papers by Tobias Moskowitz (Link)
Turtle Trading
- Way of the Turtle by Curtis M. Faith (Link)
“Drilled into me the importance of process, even if simple, before my career really ever began”
- The Original Trading Rules pdf (Link)
Jack D Schwager
“Biggest takeaway: a lot of shit works, figure out what aligns with your personality”
Popular Themes
Topic: Numeracy and stats
Nate Silver: The Signal and the Noise (Link)
Darrell Huff: How To Lie With Statistics (Link)
Alex Reinhart: Statistics Done Wrong (Link)
John Allen Paulos: Innumeracy (Link)
Phil Tetlock & Dan Gardner: Superforecasting (Link)
Microeconomic Reasoning
Levitt and Dubner: Freakonomics (Link)
Tim Harford: The Undercover Economist (Link)
Value Investing
Munger/Buffet
- Poor Charlie’s Almanac (Link)
- Munger Speech at USC, 1994 (Link)
- Buffet’s original partnership letters (Link)
Seth Klarman: Margin of Safety (Link)
Joel Greenblatt: The Little Book That Beats The Market (Link)
Competitive Markets
Michael Mauboussin
Jesse Livermore (pseudonym)
- Diversification, Adaptation, and Stock Market Valuation (Link)
“This changed my thinking about how market participants behave and how their learning process can influence future prices”
- The Single Greatest Predictor of Future Stock Market Returns (Link)
Risk
Benoit Mandelbrot: The Misbehavior of Markets (Link)
William Poundstone: Fortune’s Formula (Link)
Chris Cole: Research Papers (Link)
Parallels to Edge in Sports
Michael Lewis: Moneyball (Link)
Bill James: Win Shares (Link)
Dean Oliver: Basketball on Paper (Link)
History
Daniel Yergin: The Prize (Link)
“It’s a good exercise in rethinking everything-you-know based on a new model.”
Ron Chernow: The House of Morgan (Link)
Emile Zola: Money (Link)
Michael Lewis
William Thorndike: The Outsiders (Link)
Jim Rogers: Investment Biker (Link)
Satyajit Das: Traders, Guns, and Money (Link)
Roger Lowenstein: When Genius Failed (Link)
Scott Patterson: The Quants (Link)
Steve Knopper: Appetite for Self-Destruction (Link)
Behavioral/Psychology
Thomas Gilovich: How We Know What Isn’t So (Link)
Lynne Twist: Soul of Money (Link)
Kahneman and Tversky: Thinking Fast and Slow (Link)
Steven Johnson: Mind Wide Open (Link)
Brett Steenbarger: The Psychology of Trading (Link)
Edward Russo: Decision Traps (Link)
General Investing
William J. Bernstein: The Four Pillars of Investing (Link)
Harry Browne: Fail Safe Investing (Link)
Alexander Elder: Trading For A Living (Link)
Novel
Ayn Rand: The Fountainhead (Link)
Herman Melville: Moby Dick (Link)
“A good way meditation on how much you sacrifice if you’re goal-oriented, effective, have a high risk-tolerance, and need to work with a diverse set of stakeholders.”
Reference
Sheldon Natenburg: Option Volatility and Pricing (Link)
Mullis and Orloff: The Accounting Game (Link)
Nassim Taleb: Dynamic Hedging (Link)
Carol Alexander: Market Models (Link)
Peter Kennedy: A Guide to Econometrics (Link)
Colin Bennett: Trading Volatility: Correlation, Term Structure and Skew (free pdf)
Lists from others whose work I follow:
Meb Faber (Link)
Dan Egan (Link)
Epsilon Theory Core Curriculum (Link)
Jason Collins’ Economics + Evolutionary Bio list (Link)
Taylor Pearson (Link)
Jason Zweig (Link) and his Top 5 (Link)
Famous Investors’ Reading Lists (Link)
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