The Performance of Closed-End Investment Companies：封闭式投资公司的业绩.pptVIP

Topic 10: Behavioral Finance Traditional Finance Markowitz, Fama and the rest of the boys Rational decisions and unbiased predictions Risk, return, covariance Semi strong market efficiency and portfolio theory MM (1961) – assumes investors “always prefer more wealth to less and are indifferent as to whether a given increment to their wealth takes the form of cash payments or an increase in the market value of their holdings of shares” What do we observe? Should be low trading – low volume? Trade on info – low volatility? Growth/Value or Small/Large shouldn’t matter? Dividends shouldn’t matter Equity premium of 7% is too high for risk Momentum shouldn’t exist Positive news boosts depressed stocks more than “up” stocks IPOs underperform long term Addition to SP 500 permanently increases $ Buffett is just a chance happening What’s going on in the “real” world? “Buy on the rumor, sell on the fact.” “Buy the dips, sell the rallies” “Cut losses short, let profits run” “When in doubt, stay out” “Manage the risks and profits will take care of themselves” “The more certain the crowd is, the surer it is to be wrong” Behavioralism Along come Kahneman, Thaler, Schliefer, Odean, and pals in the 1990s Kahneman had right idea in the 1970s Risk → Fear Return → Greed “Bounded rationality” – event is too complex → biases in heuristics Not always rational and can make predictable errors What’s the diff? Information = Investors’ food which determines activity and prices EM – prices integrate all info quickly BF – some info neglected and other exaggerated Noise trading – uncorrelated with changes in fundmental/intrinsic value. EM – just that, noise! – nothing in aggregate BF – may be biased See other differences play out in slides that follow Behavioralism It’s 1896 and the “Dow” is at 40. It’s 1998 and the “Dow” is at 9181 What would it have been if dividends had been reinvested?? 652,230 – like folding the paper 100 times “Heuristics” enable dealing with many inputs “anchoring”