The Winner’s Curse and Homo Investorus
The world does not operate in accordance with conventional economic or finance theory posited on the notion that people are both rational and selfish.
Uncertainty
Want better returns? Forget risk. Focus on fear
In effect they acknowledge that going down the Capital Asset Pricing Model rabbit hole with Alice did not get them to Wonderland. Their solution is to go further down the same rabbit hole.
Random Walk fallacy in investing
The defining feature of randomness of a series of data is that each data event be independent from all other data events in the series.
Investors are more anxious about the economy than at any time in recent memory – true or false
He’s encouraging a kind of groupthink or social proofing. He tells us that everyone he talks to says there’s more reason for anxiety than in recent memory. He is inviting us to believe it is true.
The price of risk in equity markets
Mr. Market demands a very high expected return before he will invest in stocks. Whereas Mr. Bond suffers money illusion.
Sentiment and the four faces of risk
Ironically, the four faces of risk reverse actual risk. Risk is perceived to be highest in bear markets; moderate in sideways markets; increasingly lower in bull markets; and, more or less ignored, in bubbles.
Not everything that counts can be counted
It is difficult to accept uncertainty. It is tempting to try and escape it by kidding ourselves and each other, but that is liable to land us in greater difficulties.
Putting a world of turmoil in perspective
Today’s investor cannot tell from this record what percentage gain in earnings, dividends and prices he may expect in the next ten years, but it does supply all the encouragement he needs for a consistent policy on common-stock investment.
I differ with Cliff Asness about Risk Adjusted Returns
Once you own shares in a company, the investment risk you face is a risk that undermines the value of what you own
The Optimism Bias paradox
We simply attempt to be fearful when others are greedy and to be greedy only when others are fearful
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