Obit for Efficient Market Hypothesis

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Jun 7, 2009 2:54 pm

http://www.nytimes.com/2009/06/06/business/06nocera.html?pagewanted=1&_r=1&ref=business



Jun 8, 2009 9:07 pm

I think the issue isn't whether the market is efficient, but whether index funds outperform the vast majority of money managers - which is definitely the case.Grantham's own performance vs the stock market has been pretty mediocre, as far as I can tell.

Jun 8, 2009 9:21 pm
san fran broker:

I think the issue isn't whether the market is efficient, but whether index funds outperform the vast majority of money managers - which is definitely the case.Grantham's own performance vs the stock market has been pretty mediocre, as far as I can tell.

 
However, the authors make mention of behavioral science being a much bigger player in the world of academic economics.  I tend to think the behavior of an investor plays a much bigger role in the overall results of a portfolio.  If an investor sells out due to panic, right before a market rally, it doesn't matter if he originally sold out of index manager or actively-managed managers.  This has a huge negative impact on results obviously.
Jun 8, 2009 10:01 pm

Thanks for clarifying, Ice.  I was referring more to the typical retail client who allows their emotions to get in the way of making good investing decisions.  So, even though it wasn't directly related to the institutional definition of behavioral science, I'm assuming a lot of the same principles can be applied to the retail space.  Hence, active vs. passive is a fruitless conversation.   Not really of course, but I think many people in our profession spend waaaaaaaaay too much time on allocations, manager selection, etc. 

Jun 9, 2009 1:33 am
iceco1d:

I knew what you meant, and I agree.  If you can't get a client to stay put in the plan/strategy/etc. that you lay out for them, the rest of this is just noise. 


Won't really matter that much for clients that sold out of Dow @ 7,000, and are now sitting in CDs @ 2% until they decide to buy back in @ Dow 13,000...BRILLIANT!!



+1

Jun 9, 2009 4:54 pm

and when the DOW does get back to 13000, can I get a year on that,  most of your clients will be breaking even.