I don't read very much about finance but sociologically it was a surprise to me that there are professional scholars (as opposed to stock traders) who think you can reliably make money off of a persistent fraction of the market that bets wrong.
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The authors define a "glamour" stock as one that has a high price relative to earnings, book value, or cash flow; a value stock is one that has a low price relative to earnings, book value, or cash flow. Value stocks do better than glamour stocks.
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How much better? 11% a year better. That's a LOT if you're doing long-term investing.
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maybe it's the wrong word? I mean "as a matter of what people think, I didn't know econ professors thought persistent investor bias was a thing"
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I am sorry. I interpreted that as implying such a notions as persistent investor bias is so antiquated or absurd it could not be held as a sincere intellectual conviction. Perhaps a stretch on my part!
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I thought the amount of ‘dumb money’ in the market was very small, because the vast majority of investments are made by institutional investors? Shouldn’t the market correct itself once such a strategy ‘gets out” so the strategy no longer works once ‘everyone’ knows it?
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Plausibly that already happened, there hasn't really been a value premium since value did extremely well in the 2000 bubble
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I saw it as an expression of suprise and skepticism, with a suitable disclaimer. How would you have expressed your surprise at this finding?
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My understanding is that "value" investing can work because it uses a different time-frame to benchmark its overall returns. Fund managers who use "value" investing (and other types that don't follow the herd) tend to lose investors before their strategy can take effect.
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