A RANDOM WALK DOWN WALL STREET By Burton Malkiel (Efficient Market Hypothesis)
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- Опубліковано 5 сер 2024
- A RANDOM WALK DOWN WALL STREET
Burton Malkiel takes us through what he calls a random walk down wall street, he believes stock prices can't be predicted in the short to medium term, despite technical and fundamental analysts believing differently.
Similar to the efficient market hypothesis,, the random walk hypothesis suggests that all stock prices reflect all current 'known' information about an asset, and that an investor cannot consistently outperform the market.
Malkiel places both technical and fundamental investing strategies into two theories, the firm foundation theory and the castles in the sky theory.
The firm foundation theory is known for value investors like Benjamin Graham and Warren Buffet, whereas the castles in the sky theory is more aligned to technical analysts like Mark Minervini or Stan Weinstein.
But rather controversially, Malkiel believes neither can consistently out perform an index fund......
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Great video, congratulations! A small, personal contribution: while I do keep mostly low-cost, index ETFs in my portfolio, I also use a little bit of "fundamental analysis" to decide *what* to buy (just a handful of stocks) and a little bit of "technical analysis" to decide *when* to buy something (I try not to sell anything, unless forced to do so). Each and every "theory" has something to tell us. It is just a matter to spot it.
In Market Sense and Nonsense, Jack D. Schwager provided some compelling arguments why the efficient market hypothesis is wrong.
1 - The magnitude of some price moves would be a statistical impossibility if the efficient market hypothesis were true. If true, the impossible has happened-and many times!
2 - Some market participants have achieved track records that would be a statistical impossibility if the efficient market hypothesis were true.
3 - The assumed mechanism for prices adjusting to correct levels is based on a flawed premise, since the price impact of informed traders can be outweighed temporarily by the actions of less knowledgeable traders or by the activity of hedgers and governments, which are motivated by factors other than profit.
4 - Market prices completely out of line with any plausible valuation are a common occurrence.
5 - Price moves often occur well after the fundamental news is widely known.
6 - Everyone having the same information does not imply that everyone will use information with equal efficiency.
7 - The efficient market hypothesis fails to incorporate the impact of human emotions on prices, thereby leaving out a key market price influence that throughout history has at times (e.g., market bubbles and crashes) dominated the influence of fundamental factors.
Wow great comment👍
I did backtesting with several moving average crossovers on several US stocks over the last 20 years and found, to my surprise, that the buy and hold strategy outperformed them in 90% cases.
great work as always!! He has a great point of for the majority of people, buying and holding will be smarter. But for the hustlers(which I'm assuming pretty much everyone watching these videos), it may be more optimal to learn a combination of swing/day trading while dollar cost averaging into a long term portfolio monthly. The next 10 years will most likely be VERY volatile. So by learning how to trade these fluctuations, along with scooping up great deals from overreactions, you'll get the best of both worlds ;)
Thanks TradesGiving. good idea👍
Just starting now, I’m confused what to do
Just discovered your channel, I love it! subscribed and liking each one of the videos I see. Thanks for your work!!
Thanks Victor👍
Hi Gareth. Another excellent summary and video. This was one of the first books about investing I ever read. I picked it out at random as I had no idea what investing really was. Many years later I still have so many of Malkiel's messages ringing in my head and recall with clarity how reading it all those years ago sent so many light bulbs off that I begun, slowly, to learn to invest. Some things in life are bifurcation points, switching your path onto another. Reading A random walk down wall street was one such for me. Thanks again for your vids, they are excellent. Regards Howard
Thanks for the detailed feedback Howard.. It is a very in depth book and trying to prioritise some key topics in a short summary was some task. A great book, thanks for the recommendation.
Awesome summary! Detailed, concise, well articulated, and simple 👏🏽👏🏽👏🏽.
Thanks Sun of Sotep! 🙏
Really enjoy your channel and all of your videos. Specially when you talked about the little adjustment you apply to adapt the theory from the books to modern times. Keep the awesome work 👍👍👍
Awesome, thank you Oscar!
Many thanks for this one Gareth. Superb presentation. I agree that hybrid investing captures the best of both worlds. Whilst I have great respect for Burton Malkiel, I have reservations about Efficient Market Hypothesis and Modern Portfolio Theory. I liked the sections on probability and psychology.
Many thanks again William!
*Great summary, and nice use of videoscribe as well.* 👍
Thank you kindly!
Another excellent summary and video. thanks
Thanks Amit
My God this book is heavy! I am a beginner in this. Still testing by using a small account and a demo account. Thanks to your review I picked it up. Only 2 chapters in the fundamentals of trading are being cleared out. And again I say- this book is heavy!!! Esp for a person from a background not at all connected to this. Thanks for reading it all and putting up this review.
Glad it was helpful!
Beautiful channel. You have a very impressive teaching style.
Thank you very much!🙏
Your videos are awesome!!... Greetings from India!
Thank you so much 😀
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Great thank you very much
Welcome 😊
Excellent summary
Glad you liked it👍
Great content! well explained thru the creative video.
What software do you use to create this?
Thanks! i use videoscribe.
I agree with you. Not the best book I’ve read about investment. If you can review the book of investing wisdom or the making of a market guru , it will be great. Thanks for the video 🤗
Hi, i'll check them out.. 👍
Great video
Glad you enjoyed it
Great video, Mutual Funds & ETFs are definitely the way to save time and beat the inflation rate at the same time 🙌
Hi Queenie, I would tend to lean towards index funds rather than mutual funds personally... Thanks for your feedback!
Hello. My 2nd comment to your video. It inspired me to pick the book. Now that I am reading it, 50% done...its giving me this sinking feeling of Trading. The author is heavily tilted in using the market as an investment tool no doubt. But the way he speaks of Trading, I have been frozen for the past few days. Just haven't been able to trade. In your video you speak of using a hybrid approach. Any advice that you can help me out with ? Any book which balances out all that this author says ?
Hi Gohan, I use weekly charts, with fundamentals, generally consolidation breakouts with volume. I suggest Darvas, Weinstein, trading in the zone, and an understanding of risk reward. Watch all the videos too of course :-)
Hi Gareth, thank you for this another great video. As you said, you use both technical & fundamental, did you get some inspirations from screeners of the book What Works On Wall Street ?
Hi Fabien, thanks.. Actually no but that will be a great book to review soon👍, No so much inspiration, just years in the market understanding what works, back testing etc.. I was certainly intrigued from a young age that some were successful with technical and others with fundamental, I could see logic in the concept of both hence i merged them. Who knows may be a video in the future.
@@FinancialWisdom If you review it i will be glad to share your toughts about their trending value portfolio.
@Fabien Zugno great
It's a Big Mac
You are doing a great job....
Thank you so much 😀
@@FinancialWisdom do u trade?
Hi - Yes i do, generally 50% of my equity is used for trading, although I use the weekly charts for the technical analysis, many people refer to 'trading' as using much smaller timeframes, but thats not my style.
I am continuously loosing in trading...do u have any improvement point for me..
@@musicmagician8723 Hi Music, with limited information it would be tough for me to comment. What time frame do you use? what strategy? etc etc
Money printing go Birrrlllllllllll
If you want to reduce the risk derivatives can been used instead of holding 50 stocks with a lesser cost
I can't agree with your rating on this one.
There are too many traders, Renaissance Technology being only one, that clearly and irrefutably disproves the entire, central premise of this book. GIGO strikes again!
How to multiple money in stock market pls make a video on this subject. How we grow money fast or multiple money as soon as possible.
Hi, watch all the videos 😉🙏
❤❤❤
Thanks Christian👍
دولت هلند عاشق کاغذ بازیه😂
Love your videos and your work. With 90% of retail investors loosing money I suppose the author is correct. But if I am part of the 10% I am truely horrified some of these assumptions / reasoning. I appreciate your reviewing all the different books but this book, not your review, I am not a fan of.
The Richest Man In Babylon🙌🏾
Thanks Cameron 👍
you’re just using this book to sell your broker or counseling service. Lame
Shame you are not finding value with all the free content I put out.
Malkiel is correct
This guy's assumptions are beyond bizarre and unsupported. People beat the market all the time.
Few people.