X-Message-Number: 12755 Date: Tue, 9 Nov 1999 11:28:49 -0800 (PST) From: Doug Skrecky <> Subject: Investing, Skrecky In Message #12750 wrote: > 3. The notion that the markets are "efficient" is laughable and was never > taken seriously by real investors. In the first place, if markets were > anywhere near efficient, you could just throw darts and it wouldn't matter. > I though I should mention that a randomly throw dart outperforms most "professionally run" mutual funds. Index funds tend to lead the heap. > As for Doug's suggestion that we buy the journals he mentioned, I hope he > will forgive a chuckle. Academics (with the usual exceptions) are notoriously > poor in the actual markets. ("Those who can, do; those who can't, teach; and > those who can't teach, teach teachers".) One of the biggest fund debacles > this last year was managed by two Nobel laureate economists! > The only source of investment advice that I would term "scientific" is that offered in peer reviewed finance journals. There whatever stock market inefficiencies that do exist are analyzed. With repect to sector investing in a high growth industry two inefficiencies may be of some relevance. 1# It has been proven that a strategy of investing in stocks that has experienced a high price appreciation over the last year tend to outperform the next year as well. It has also been found that stocks that have had a high price appreciation over several years, or have high price/book ratios tend to underperform in future. This is the rationale for so-called value investing, which has been successful in earning abnormally high returns this century. Rate This Message: http://www.cryonet.org/cgi-bin/rate.cgi?msg=12755