Gifted Issues Discussion homepage Forums Recommended Resources Stock/Finance/Econometric Resources for age 10

I am not exactly sure what I am looking for, but it is somewhat age-appropriate material relating to stock markets, finances and econometrics. It is for my DS10, who is on the last quarter of Algebra I. He has some math talent but he seems to think that he doesn't want to pursue pure math or pure science but is much more intereseted in practical/useful applications. Stock market similulation programs(I favored Nasdaq myself) would be of interest. He expressed interest in econometrics, but I only studied that in college after having differential equations, linear algebra and statistics under my belt. Is there even a way to meaningfully study econometrics without that kind of math background? Same issue with finance: The only finance courses I studied were at the graduate level (paid by my employer) before I went back to school in a completely different field.

There must be some more basic level material but I am at a loss as that is outside my experience.

Actually, instead of age 10, perhaps I should have more loosely specified high school-ish. He has the vocabulary and comprehension to handle high school level text.

Maybe my estimation is biased (bad econometrics joke), but I think OLS is teachable at a high school level. All you really need to understand are means and variances; the rest is just variations on a theme.

You could do basic OLS estimates handraulically in Excel or a free program called "R". At a minimum, I think you could teach OLS conceptually using manipulables and introduce the calculations on an interest-led basis.

The book linked below is an excellent intro econometrics text. The examples are simple, and there are clear and concise math primer chapters. You might be able to find an older edition for pennies on the dollar. Nothing fundamental will have changed between editions.

http://www.amazon.ca/gp/aw/d/1111531048

A really good introduction to financial markets is Burton Malkiel's "A Random Walk Down Wall Street". It's written to be accessible to a broad audience-- I'd characterize it as high school level. You mention NASDAQ; are you paper trading? You could probably introduce CAPM, Fama-French, and later multi factoral asset pricing models--just the bare bones equations--to construct a managed paper portfolio and estimate fun things like alpha and an efficient frontier.

Let me know if any of this interests you. I can link you to good papers on CAPM and Fama French, if you like.

A bright college senior, majoring in chemistry, asked me about my job as a financial analyst. To pitch my answer at the right level, I asked her if she knew the difference between a stock and a bond. She did not. I wonder how many college graduates do. So I suggest defining and explaining basic terms such as profit, dividend, interest, stock, bond, stock index, and mutual fund.

Thanks. That looks interesting and like something that DS might like. He wants to invest in penny stocks (LOL), but I am not quite ready to trust him with real money.

Thanks - you jogged my memory. I did take a basic econometrics course prior to the seminar on contemporary published papers. I can't believe that textbook you linked is almost $200. I remember textbooks being close to $100 in my day - a lot of inflation in a quarter century. Anyway, you reminded me that I still have some books from as far back as college.

While even my basic econometric text is way too complicated (filled with calculus & matrix algebra & statistics), I did locate an overview paperback that provides a more intuitive feel with just the bare minimum notations and technical details (Peter Kennedy's A Guide to Econometrics published by MIT Press in 1985). Although even with that book, a richer math background and more solid economics/finance basics would make a huge difference.

I have never worked in the financial markets. I am just more comfortable/familiar with the stocks on NASDAQ than the other exchanges so would be able to discuss them with a modicum of intelligence.

That was the general conclusion that I was reaching as well - start with basics. Although, DS does know the difference between a stock and a bond as well as almost all the basic terms you listed. I am sure there are a lot of other terms and I can probably teach him but I was hoping for an easy reference or basics source so that I would only have to answer specific questions rather than teach. I am just not a good teacher and DS is not a good student.

Which free paper trading site do you use?

I did try to explain generally that investing (at least properly) is quite complicated. Even the recent changes in tax laws have impacted decisions to hold or sell stocks long term versus short term. I think he can grasp the concept of capital gains tax rates at different income levels versus ordinary income tax rates, but the ability to properly factor them into investing decisions adds another level of complexity.

Unfortunately, DS' self-directed exploration often ends up requireing my input at some point and sometimes I just want to pass the buck.

Any of the major exchanges should allow you to build a paper portfolio. As a Canuck, I use the TSX. Google and Yahoo finance both allow you to build and monitor, I believe.

A professional investor and blogger, who I think is honest and sensible, has reviewed a number of books at http://alephblog.com/categorized-book-reviews/ . Books for aspiring Chartered Financial Analysts are at http://www.cfapubs.org/loi/inv .

Books by or about famous and infamous investors can be interesting and informative -- I suggest books by David F. Swensen (successful manager of the Yale endowment), by Peter Lynch, Roger Lowenstein's "Buffett: The Making of an American Capitalist" and "When Genius Failed: The Rise and Fall of Long-Term Capital Management", Jack Schwager's "Market Wizards" books, and "More Money Than God: Hedge Funds and the Making of a New Elite" by Sebastian Mallaby.