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 [...]
Archive for the ‘Behavioral economics’ Category
Richard H. Thaler on Overconfidence in Forecasting
Posted in About, Behavioral economics, tagged Richard Thaler on August 23, 2010 | Leave a Comment »
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 Mean reversion, Value Investment 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 [...]
One for the annals of behavioral finance
Posted in About, Behavioral economics, Value Investment, tagged Behavioral investing, Value investing 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% [...]
Uncommon lessons from Phil Fisher
Posted in About, Behavioral economics, Contrarian investment, Stocks, Value Investment, tagged Philip A Fisher, Value investing, Value Investment 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 [...]
Dreaming of electric sheep
Posted in About, Behavioral economics, Quantitative investment, Stocks, tagged Quant, Quantitative 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 [...]
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 Liquidation, Liquidation Value, NCAV, Net Current Asset Value, Net Net, Net Net Stock, Net Quick Value, Quantitative, Value Investment 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 [...]
Three ghosts of bear markets past, redux
Posted in About, Behavioral economics, Contrarian investment, Greenbackd, Net Current Asset Value, Stocks, tagged Japan on February 16, 2010 | 2 Comments »
Speculating about the level of the market is a pastime for fools and knaves, as I have amply demonstrated in the past (or, as Edgar Allen Poe would have it, “I have great faith in fools — self-confidence my friends will call it.”). In April last year I ran a post, Three ghosts of bear markets [...]
The Kabuki narrative
Posted in About, Behavioral economics, Liquidation, Liquidation Value, Net Current Asset Value, Net Quick Stocks, Net Quick Value, Stocks, tagged Japan, Liquidating Value, Net Current Asset Value, Net Net Stock, Net Quick Value on February 12, 2010 | 5 Comments »
Regular readers of Greenbackd know that I’m no fan of “the narrative,” which is the story an investor concocts to explain the various pieces of data the investor gathers about a potential investment. It’s something I’ve been thinking about a great deal recently as I grapple with the merits of an investment in Japanese net [...]
The trend is your end.
Posted in About, Behavioral economics, Quantitative investment, Stocks, Value Investment, tagged Momentum, Quantitative, Value on January 28, 2010 | 4 Comments »
In “Black box” blues I argued that automated trading was a potentially dangerous element to include in a quantitative investment strategy, citing the “program trading / portfolio insurance” crash of 1987. When the market started falling in 1987 the computer programs caused the writers of derivatives to sell on every down-tick, which some suggest exacerbated the crash. Here’s New [...]
The New Yorker on Richard Thaler
Posted in About, Behavioral economics, Stocks, tagged Behavioral economics, Richard Thaler on January 25, 2010 | Leave a Comment »
The New Yorker has John Cassidy’s interview with Richard Thaler, Chicago School economist and co-author (along with Werner F.M. DeBondt) of Further Evidence on Investor Overreaction and Stock Market Seasonality, a paper I like to cite in relation to low P/B quintiles and earnings mean reversion. Thaler is also the “Thaler” in Fuller & Thaler Asset Management, which James [...]
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