>From
http://www.fool.com/investing/general/2008/02/13/dont-invest-like-these-experts.aspx:
A research paper recently covered at CNNMoney.com surveyed
finance professors, finding that many took their own
teachings to heart. About two-thirds didn't try to beat the
market, investing instead in index funds, and steering clear
of picking individual stocks. Almost 15% had never purchased
a single stock!
But a minority of these professors, the active traders, did
pick stocks, and did try to beat the market. However, rather
than using the sophisticated models and theories about risk
and asset pricing that they taught their students, the study
re****ts that these professors looked at a firm's
fundamentals (such as P/E ratio) and the momentum in its
stock price -- how it performed recently, compared to
52-week highs and lows. In other words, they were chasing
performance!
The researchers fittingly wonder why finance professors
spend so much time researching sophisticated risk models if
those models are "glaringly unim****tant" in the real world.
Finance professors who want to beat the market ignore their
own (well-researched) advice and just chase the hot stocks.
Abstract of paper, from
http://papers.ssrn.com/sol3/papers.cfm?abstract_id=980364
:
This paper asks the simple question of what matters to
individuals when they buy and sell stocks. To answer this
question, we surveyed all finance professors at accredited,
four-year universities and colleges in the US to *****s our
profession's collective opinion on the matter. Our sample of
642 useable responses indicates that over two-thirds of the
sample are passive investors, and not because they don't
have the time to invest. The responses for all investors
indicates that the traditional valuation techniques
(specifically, the dividend-based valuation models) and the
traditional asset-pricing models (namely the CAPM, APT, and
Fama and French and Carhart models) are all unim****tant in
the decision of whether to buy or sell a specific stock.
Instead, finance professors, particularly finance professors
who trade stocks at least monthly and who admit they are
trying to "beat the market" with their investment dollars,
believe that firm characteristics (especially, a firm's PE
ratio and market capitalization), along with momentum
related information (a firm's returns over the past six
months and year and a firms' 52-week low and high) are most
im****tant when considering a stock sale and purchase. We
also show that finance professors have less investing
experience than one might expect, especially in the areas of
margin trading, short selling, and derivatives.
----
Editorial comment: But I am sure the "sophisticated" models
are still financially im****tant to these faculty. They
ensure a steady stream of "research" enabling promotion and
tenure and so more job income.
======================================= MODERATOR'S COMMENT:
Posters to this thread should relate comments to general financial
planning.
--------------------------------------
Misc.invest.financial-plan is a moderated newsgroup where Moderators
strive
to keep the conversations on-topic for financial planning. Other posting
guidelines include a request for brevity and another for trimming posts to
which we respond. For all of the other tips and suggestions, see "FROM
THE
MODERATORS: Posting to misc.invest.financial-plan", a weekly post now on
the
Newsgroup.
|
