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.

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