A few research notes

I’ve shared a few research notes in my public Box.net space.

There is a summary of the ABN Global Investment Returns Yearbook 2008 (just published) that contains lots of interesting charts. See the section on Chapter 3 for a summary of study by Dimson, Marsh and Staunton on the apparent success of momentum investing.

I’ve also uploaded a handful of interesting studies by James Montier, a master of behavioural finance. I particularly like his ‘Mind Matters’ piece:

Human beings are an optimistic bunch. Some 74% of fund managers think they are above average at their jobs, 70% of analysts think they are better than their peers at forecasting earnings, and a mere 9% of recommendations are sells! In part, this bullish bias stems from a natural tendency to look on the bright side of life. In part, it stems from self-serving bias and motivated reasoning. Perhaps the best way of resisting this siren call of bullishness is to focus on being an empirical sceptic – check your beliefs against reality on a regular basis

One final noteworthy point, the evidence suggests that the clinically depressed are the one group of people who see the world the way it really is. They don’t have any illusions over their abilities, hence their depression! So perhaps investors face an unenviable choice, either be depressed and see the world the way it really is, or be happy and deluded. Personally I guess the best solution may be to be clinically depressed at work, but happy and deluded when you go home!

This problem becomes more complex when you work from home!

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