Given how easily identifiable the Madoff/Ponzi scheme was mathematically, I must ask a simple question:
Does the SEC do any quantitative research ?
There is little evidence that the SEC is using any of the quantitative methods — now so common on Wall Street — for searching out and indentifying fraud.
I would suggest to the incoming head of the SEC to put together a blue ribbon of math professors, quant scientists and algo specialists to develop a few basic programs that ferrets thru market, options, and perfromance data looking for aberrational data series, and leading to criminals and fraud artists.
Numbers follow a surprising law of digits, and scientists can’t explain why
PHYSORG.com, 11:26 EST, May 10, 2007
Benford’s Law Part 1 – How to Spot Tax FraudIntuitor.com
Be Wary of Serial Correlation (December 2008)
Are They Cooking the Books?
Political Calculations, October 02, 2008
Multiple Red Flags in Madoff Case
WSJ, DECEMBER 12, 2008,