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Aftersleep Books
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Beyond the Random Walk A Guide to Stock Market AnThe following report compares books using the SERCount Rating (base on the result count from the search engine). |
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Aftersleep Books - 2005-06-20 07:00:00 | © Copyright 2004 - www.aftersleep.com () | sitemap | top |
However, the author does not make a convincing case that retail investors can exploit these inefficiencies efficiently. In other words, the anomalies the author depicts amount to separate trading strategies which should potentially help you achieve the "buy low - sell high" optimum. However, these trading strategies are associated with much higher transaction costs and taxes than a buy-and-hold strategy of an index fund. Additionally, some of these strategies are very labor intensive and information intensive. These are added costs. Finally, these strategies will cause you to cash out of the market frequently. The holding of cash balances will further reduce your return compared to investors who remain fully invested.
When all is said and done, will you come out ahead exploiting these market anomalies after you factor all added costs? The author stated that he "generally" does come out ahead of the market. However, he does not support this vague statement with any documentation. Also, he adds that going forward his strategies may be less effective because of ever changing market conditions. Thus, once a market anomaly is exploited by a few investors, the market's ever evolving efficiency erases this anomaly.
Although the book is very interesting, it is no substitute to sound investment strategies based on the Efficient Market Hypothesis. It is a far safer and easier to profit from the market's overall efficiency than to attempt to profit from its few and fleeting marginal inefficiencies.
If you are interested in this subject, I strongly recommend the classics by Burton Malkiel: "A Random Walk Down Wall Street" and "The Random Guide to Investing." I also strongly recommend John Paulos excellent "A Mathematician Plays the Stock Market." These books all suggest that you are better off focusing your energy on proper asset class diversification that reflects your risk tolerance. And, in turn invest for the long term through index funds of these respective asset classes.