Here's a statement of the obvious: The opinions expressed here are those of the participants, not those of the Mutual Fund Observer. We cannot vouch for the accuracy or appropriateness of any of it, though we do encourage civility and good humor.
FYI: My colleague Barry Ritholtz recently sat down to talk with Burton Malkiel — of A Random Walk Down Wall Street fame — on his Masters in Business podcast. Right off the bat Malkiel did some myth-busting on the Efficient Market Hypothesis. Regards, Ted http://awealthofcommonsense.com/2016/06/the-upside-of-academic-finance/
Academicians who practice the art of investing are often bombarded by bad press. Many of the purposely aimed body blows are below the belt and totally unwarranted.
Ben Carlson does a nice job summarizing the inventions and accomplishments that the academic class has contributed to the investment world. Thank you Ben for the article, and thank you Ted for the access to it. Without a doubt, given the continuing commitment to financial research, this trend-line will continue. That’s good for all of us.
Investment models will never be perfect. That’s the nature of all modeling exercises since models are forever simplifications of complex interactions that will not be captured completely. One reason for the partial failure is that all the influencing factors and their relative influence weights are not known and are themselves dynamically changing. Not much remains a constant as investor sentiment, motivations, fears, and understanding change.
There is a major battle between the Big Data statistician and the seasoned professional investor. Fundamentally, it is a battle between decision making based on equations vs. expert experience. Early-on, experience was the winner in that contest.
Nowadays, the outcome is changing as statistical analyses are gaining the upper-hand in the investment industry as well as in other professions such as medical diagnoses. For example, the machine programs read X-rays much more accurately and more consistently than do trained experts. The machines don’t get tired and never lose concentration. Big Data is winning now.
Burton Malkiel is a famous academician who has worked for countless years to enhance our understanding of the markets. His “A Random Walk Down Wall Street” has been an acknowledged classic for decades. It still is popular. Here is a Link to a Malkiel lecture that was delivered to a Google audience a few years ago that remains pertinent:
Yes, it’s over one hour long. And there is nothing really new in the video lecture. It is Malkiel being Malkiel. But it is worth the invested time as a review of time honored, effective investment principles. The lessons are timeless. Enjoy.
Of course, One strategy that immediately comes to mind is that a coupling of both the equation and the expert opinion approaches is easy to do, and the promise of better investment outcomes is increased. The merging is one way to tilt the odds just a little more in the investor’s direction. I try to do it.
As an aside, it is disappointing that this post has so few visitors. Even if you do not support the position that academic work contributes to understanding the marketplace, conventional wisdom suggests that it's always a good policy to know what the opposition is doing.
Comments
Academicians who practice the art of investing are often bombarded by bad press. Many of the purposely aimed body blows are below the belt and totally unwarranted.
Ben Carlson does a nice job summarizing the inventions and accomplishments that the academic class has contributed to the investment world. Thank you Ben for the article, and thank you Ted for the access to it. Without a doubt, given the continuing commitment to financial research, this trend-line will continue. That’s good for all of us.
Investment models will never be perfect. That’s the nature of all modeling exercises since models are forever simplifications of complex interactions that will not be captured completely. One reason for the partial failure is that all the influencing factors and their relative influence weights are not known and are themselves dynamically changing. Not much remains a constant as investor sentiment, motivations, fears, and understanding change.
There is a major battle between the Big Data statistician and the seasoned professional investor. Fundamentally, it is a battle between decision making based on equations vs. expert experience. Early-on, experience was the winner in that contest.
Nowadays, the outcome is changing as statistical analyses are gaining the upper-hand in the investment industry as well as in other professions such as medical diagnoses. For example, the machine programs read X-rays much more accurately and more consistently than do trained experts. The machines don’t get tired and never lose concentration. Big Data is winning now.
Burton Malkiel is a famous academician who has worked for countless years to enhance our understanding of the markets. His “A Random Walk Down Wall Street” has been an acknowledged classic for decades. It still is popular. Here is a Link to a Malkiel lecture that was delivered to a Google audience a few years ago that remains pertinent:
Yes, it’s over one hour long. And there is nothing really new in the video lecture. It is Malkiel being Malkiel. But it is worth the invested time as a review of time honored, effective investment principles. The lessons are timeless. Enjoy.
Of course, One strategy that immediately comes to mind is that a coupling of both the equation and the expert opinion approaches is easy to do, and the promise of better investment outcomes is increased. The merging is one way to tilt the odds just a little more in the investor’s direction. I try to do it.
As an aside, it is disappointing that this post has so few visitors. Even if you do not support the position that academic work contributes to understanding the marketplace, conventional wisdom suggests that it's always a good policy to know what the opposition is doing.
Best Wishes.