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Archive for the ‘Behavioral economics’ Category

Short your national stock market

Posted in Behavioral economics on July 6, 2011 | Leave a Comment »

Another one for the annals of behavioral finance. From Handbook of the Economics of Finance, Chapter 18, A Survey Of Behavioral Finance by Nicholas BARBERIS, and Richard THALER, University of Chicago: 7.1 Insufficient diversification A large body of evidence suggests that investors diversify their portfolio holdings much less than is recommended by normative models of portfolio choice. First, investors exhibit a [...]

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Michael Mauboussin on WealthTrack

Posted in About, Behavioral economics, Contrarian investment, Value Investment, tagged , , on June 28, 2011 | 3 Comments »

Michael Mauboussin appeared Friday on Consuelo Mack’s WealthTrack to discuss several of the ideas in his excellent book, Think Twice. Particularly compelling is his story about Triple Crown prospect Big Brown and the advantage of the “outside view” – the statistical one – over the “inside view” – the specific, anecdotal one (excerpted from the book): June 7, 2008 was a [...]

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Greenbackd Contrarian Value Portfolio Update

Posted in About, Behavioral economics, Stocks, Value Investment, tagged on September 16, 2010 | 8 Comments »

In a post in late November last year, Testing the performance of price-to-book value, I set up a hypothetical equally-weighted portfolio of the cheapest price-to-book stocks with a positive P/E ratio discovered using the Google Screener, which I called the “Greenbackd Contrarian Value Portfolio”. The hypothetical portfolio is based on Josef Lakonishok, Andrei Shleifer, and Robert Vishny’s (“LSV”) Two-Dimensional [...]

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Counterintuitive strategies for hedge fund holdings

Posted in Behavioral economics, Stocks, tagged on August 24, 2010 | Leave a Comment »

Zero Hedge has a great post on the quarterly Goldman Hedge Fund Trend Monitor. The most interesting aspect of the piece is the relative performance of stocks with the highest concentration of hedge fund holders against the performance of stocks with the lowest concentration of hedge fund holders: We define “concentration” as the share of [...]

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Richard H. Thaler on Overconfidence in Forecasting

Posted in About, Behavioral economics, tagged on August 23, 2010 | Leave a Comment »

Richard H. Thaler, Chicago School economist and co-author (along with Werner F.M. DeBondt) of Further Evidence on Investor Overreaction and Stock Market Seasonality, and the “Thaler” in Fuller & Thaler Asset Management, has written an opinion piece for the NYTimes.com “The Overconfidence Problem in Forecasting.” Thaler says: BUSINESSES in nearly every industry were caught off guard by the [...]

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ROIC and reversion to the mean: Part 3

Posted in About, Behavioral economics, Contrarian investment, Net Current Asset Value, Net Quick Stocks, Net Quick Value, Stocks, Value Investment, tagged , on April 27, 2010 | Leave a Comment »

Recently I’ve been discussing Michael Mauboussin’s December 2007 Mauboussin on Strategy, “Death, Taxes, and Reversion to the Mean; ROIC Patterns: Luck, Persistence, and What to Do About It,” (.pdf) about Mauboussin’s research on the tendency of return on invested capital (ROIC) to revert to the mean (See Part 1 and Part 2). Mauboussin’s report has significant [...]

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One for the annals of behavioral finance

Posted in About, Behavioral economics, Value Investment, tagged , on April 23, 2010 | 1 Comment »

Oh dear (Daily Reckoning via Guru Focus): 04/21/10 Gaithersburg, Maryland – Ken Heebner’s CGM Focus Fund was the best US stock fund of the past decade. It rose 18% a year, beating its nearest rival by more than three percentage points. Yet according to research by Morningstar, the typical investor in the fund lost 11% [...]

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Uncommon lessons from Phil Fisher

Posted in About, Behavioral economics, Contrarian investment, Stocks, Value Investment, tagged , , on March 18, 2010 | 10 Comments »

In the Introduction to my 2003 copy of Philip A. Fisher’s Common Stocks and Uncommon Profits and Other Writings, his son, Kenneth L. Fisher, recounts a story about his father that has stuck with me since I first read it. For me, it speaks to Phil Fisher’s eclectic genius, and quirky sense of humor: But one [...]

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Dreaming of electric sheep

Posted in About, Behavioral economics, Quantitative investment, Stocks, tagged , on February 25, 2010 | 2 Comments »

One of the most interesting ideas suggested by Ian Ayers’s book Super Crunchers is the role of humans in the implementation of a quantitative investment strategy. As we know from Andrew McAfee’s Harvard Business Review blog post, The Future of Decision Making: Less Intuition, More Evidence, and James Montier’s 2006 research report, Painting By Numbers: An Ode To Quant, in context [...]

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Walking the talk: Applying back-tested investment strategies in practice

Posted in About, Behavioral economics, Contrarian investment, Liquidation Value, Net Current Asset Value, Net Quick Stocks, Quantitative investment, Stocks, Value Investment, tagged , , , , , , , , on February 17, 2010 | 8 Comments »

Aswath Damodaran, a Professor of Finance at the Stern School of Business, has an interesting post on his blog Musings on Markets, Transaction costs and beating the market. Damodaran’s thesis is that transaction costs – broadly defined to include brokerage commissions, spread and the “price impact” of trading (which I believe is an important issue [...]

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