Old articles – Page 9 – Jonathan Davis

The Mystery of Momentum

February 7, 2011 Jonathan Davis

The three big anomalies in stock market behaviour that academics have identified over the past 50 years are these:

* Small cap stocks tend to outperform large cap stocks over time;
* Value stocks tend to perform better than growth stocks; and
* Momentum, or buying the winners of the recent past and selling the losers, is a surprisingly effective strategy.

Of these three the most recent to be documented, and in some ways the most surprising, is the last.

After all, if it was so easy to put together a winning strategy by following a simple “buy winners, sell losers” rule, you would expect so many investors to adopt the strategy that it would cease to work. This is exactly what happened in the 1980s, when so many investors tried to implement the recently documented small company effect that the strategy stopped working for several years afterwards.

Yet, as Dimson, Marsh and Staunton, the London Business School academics, reported yesterday as they unveiled in London the latest edition of their annual Global Investment Returns survey, the momentum effect has been both powerful and persistent, despite all the publicity that it has attained in recent years, which should by rights have killed it off as an observable phenomenon.

An Exercise in Character Analysis

November 8, 2010 Jonathan Davis

Does it make a difference as a fund manager how well qualified you are? This intriguing question is raised by an new piece of academic research that looked anew at the question of whether a manager holding a CFA (Chartered Financial Analyst) or MBA is likely to produce superior returns in a fund. I am grateful to the publication Index Investor for alerting me to the findings of a recent research paper* on this topic by Oguzhan Dincer, Russell Gregory-Allen and Hany Shawky.

Technical Analysis Pulled Out Of The Bin

October 18, 2010 Jonathan Davis

Three years ago in this space I noted that Dow Theory had given an important technical signal on 23 November 2007 indicating that the US equity market had entered “a primary down trend”. Although the equity market looked temporarily oversold, what it appeared to mean, if you believed in such things, I suggested, was that “investors should be preparing for a market whose underlying trend from here is down, not up”. Well, that didn’t turn out to be a bad call, as the Dow Jones index subsequently fell by 50% to its March 2009 low, and as of last week was still trading 15% below its level at the time the signal was given.

Trying Not To Be Too Clever

October 15, 2010 Jonathan Davis

Before he became a rich and admired preserver of investors’ capital, Jonathan Ruffer had, by his own account, two unsuccessful spells as a barrister. It is not long into our interview (for The Spectator) that I gain a clue as to why this seemingly harsh self-assessment might be true. We have been discussing the credit crunch, which he publicly predicted was on its way well before it hit – the Queen and others mystified by why nobody saw it coming was clearly not a client – and how governments and policymakers should best respond to it.

Blind Spots and Wisdom of City Man

July 19, 2010 Jonathan Davis

One of the issues raised again by Niall Ferguson’s absorbing new biography of Siegmund Warburg is why someone regarded, rightly, as “the most important City figure of the postwar period” should have had such an apparent blind spot about the growth and profit potential of investment management as a business.

Time for Procrastination Is Passing

June 15, 2010 Jonathan Davis

Paul Krugman, the Nobel Prize winning economist, was in top thundering form in his comments on the recent meeting of G20 finance ministers, which produced a noticeable change in political rhetoric by welcoming the plans by several countries to tackle their hefty budget deficits.

« 1 … 7 8 9 10 11 12 »