Excel Mistakes: The London Whale vs Reinhart and Rogoff | Exploring Markets

Excel Mistakes: The London Whale vs Reinhart and Rogoff


Two very interesting mistakes. Let it be lesson to continue to question and/or critique the 'experts' 

EXCEL MISTAKES


THE LONDON WHALE (FROM J.P. MORGAN):

"Specifically, after subtracting the old rate from the new rate, the spreadsheet divided by their sum instead of their average, as the modeler had intended. This error likely had the effect of muting volatility by a factor of two and of lowering the VaR.... It also remains unclear when this error was introduced in the calculation."


REINHART AND ROGOFF:

"The authors point out that there are three problems with our 1945-2009 averages and the paper itself: (i) a coding error that causes the first five countries in the alphabet to be omitted in forming averages for the 1946-2009 period in one figure, (ii) “selective exclusion” of 1946-1950 for New Zealand, and (iii) “unconventional weighting of summary statistics”—the implication being that these omissions are intentionally used to bias the results."