investment philosophies(投资金融学方面的书籍)ch6.pdfVIP

1 CHAPTER 6 TOO GOOD TO BE TRUE? TESTING INVESTMENT STRATEGIES As investors, we are constantly bombarded with sales pitches from experts claiming to have found the secret formula or the magic model that guarantees investment success. Buy stocks using this strategy, they say, and you will get a portfolio that has low risk and high returns. While you do not want to rule out the possibility that such strategies exist, it pays to be skeptical. In this chapter, we consider how to test investment strategies. In the process, we will also examine what we mean when we say that markets are efficient and cannot be beaten or that markets are inefficient and can be beaten What is an efficient market? What does it imply for investment and valuation models? Clearly, market efficiency is a concept that is controversial and attracts strong views, pro and con, partly because of differences between individuals about what it really means, and partly because it is a core belief that in large part determines how an investor approaches investing. This chapter provides a simple definition of market efficiency, considers the implications of an efficient market for investors and summarizes some of the basic approaches that are used to test investment schemes, thereby proving or disproving market efficiency. Market Efficiency and Investment Philosophies The question of whether markets are efficient, and if not, where the inefficiencies lie, is central to choosing your investment philosophy. If markets are, in fact, efficient, the market price provides the best estimate of value, and the process of valuati