Table of Contents

  1. Title Page
  2. Copyright
  3. Dedication
  4. Preface
  5. Acknowledgments
  6. Part One: Why You Can Beat the Experts
    1. Chapter 1: Are Experts Trying Too Hard?
      1. Why Do We Rely on Experts?
      2. What Are the Experts' Incentives?
      3. Are Experts Worthless?
      4. The Expert's Hypothesis
      5. Summary
      6. Notes
    2. Chapter 2: Simple Models Typically Beat the Experts
      1. The Evidence Shows…
      2. A Study of All the Studies
      3. What if Experts Have the Model?
      4. But Investing Is Different, Right?
      5. Why Experts Fail to Beat Models
      6. Summary
      7. Notes
    3. Chapter 3: Experts Are Biased and Overconfident
      1. The Biased Brain
      2. Summary
      3. Notes
    4. Chapter 4: Experts Tell Us Stories, Not Facts
      1. Story-Based Investing
      2. Evidence-Based Investing
      3. The Recap: Why Experts Fail
      4. Why Not Use Models?
      5. Summary
      6. Notes
  7. Part Two: How You Can Beat the Experts
    1. Chapter 5: A Framework for Investment Decisions
      1. Assessing an Advisor Is Difficult
      2. The FACTS Framework
      3. We've Got the FACTS: Now What?
      4. Summary
      5. Notes
    2. Chapter 6: A Simple Asset Allocation Model That Works
      1. Asset Allocation
      2. A Simple Asset Allocation Model That Works
      3. But Which Assets Do We Choose?
      4. Summary
      5. Notes
    3. Chapter 7: A Simple Risk Management Model That Works
      1. A Simple Risk Management Model That Works
      2. How Does ROBUST Work?
      3. Summary
      4. Risk Management Research (For Geeks Only)
      5. Notes
    4. Chapter 8: Simple Security Selection Models That Work
      1. Value Investing
      2. Momentum Investing
      3. A Simple Momentum Model That Works
      4. Combining Value and Momentum
      5. International Stocks
      6. Get ‘Er Done
      7. Summary
      8. Notes
    5. Chapter 9: The Do-It-Yourself (DIY) Solution
      1. Exploring a Simple Equal-Weight Five Asset Class Model
      2. Enhancing the Ivy 5 Concept
      3. Finish Strong: The Ultimate DIY Solution
      4. Get ‘Er Done
      5. Notes
    6. Chapter 10: Some Practical Advice
      1. Three Reasons We Will Not Be a DIY Investor
      2. Three Reasons You Might Fail
      3. But Don't Lose Hope!
      4. Is DIY the Only Solution?
      5. Notes
  8. Appendix : Analysis Legend
  9. About the Companion Website
  10. About the Authors
    1. Index
  11. End User License Agreement

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Guide

  1. Cover
  2. Table of Contents
  3. Preface
  4. Part 1: Why You Can Beat the Experts
  5. Begin Reading

List of Illustrations

  1. Chapter 1: Are Experts Trying Too Hard?
    1. Figure 1.1 Ed Adelson Checkerboard Illusion
    2. Figure 1.2 Ed Adelson Checkerboard Illusion Answer
    3. Figure 1.3 The Decision-Making Process
  2. Chapter 2: Simple Models Typically Beat the Experts
    1. Figure 2.1 Parole Decisions and Recidivism Correlation
    2. Figure 2.2 Models vs. Experts Across 136 Academic Studies (Win %)
    3. Figure 2.3 Hit Rate for Classification Accuracy (%)
    4. Figure 2.4 Cumulative Return May 2009 to April 2011 (%)
  3. Chapter 3: Experts Are Biased and Overconfident
    1. Figure 3.1 Rational and Irrational Behavior
    2. Figure 3.2 Anchoring Example
    3. Figure 3.3 Anchoring Example Results
    4. Figure 3.4 Framing Effect
    5. Figure 3.5 Value of $100 Invested
    6. Figure 3.6 Promoting the Use of Nuclear Power in the US
    7. Figure 3.7 Allowing More Offshore Oil and Gas Drilling
    8. Figure 3.8 Perceived Guilt by Time of Day
    9. Figure 3.9 Overconfidence
    10. Figure 3.10 Nine Levels of Information
  4. Chapter 4: Experts Tell Us Stories, Not Facts
    1. Figure 4.1 Real Equity and Real GDP Per Capita Growth
    2. Figure 4.2 Scatterplot of Payout Ratio vs. Subsequent 10-Year Real Earnings Growth, 1946–2001 Data
  5. Chapter 6: A Simple Asset Allocation Model That Works
    1. Figure 6.1 Classic Modern Portfolio Theory Chart
    2. Figure 6.2 The IVY 5 Concept
  6. Chapter 7: A Simple Risk Management Model That Works
    1. Figure 7.1 TMOM = Bad; MA = Good
    2. Figure 7.2 TMOM = Good; MA = Bad
  7. Chapter 8: Simple Security Selection Models That Work
    1. Figure 8.1 Past 5-Year Earnings Growth Rates and Prices
    2. Figure 8.2 Future 5-Year Earnings Growth Rates
    3. Figure 8.3 Lifecycle of a Trend
    4. Figure 8.4 Vanguard Stock Style Chart
  8. Chapter 9: The Do-It-Yourself (DIY) Solution
    1. Figure 9.1 Allocation under the Ivy 5 Concept
    2. Figure 9.2 Ivy 5 with a Moving Average Rule
    3. Figure 9.3 Three DIY Concepts
    4. Figure 9.4 DIY Moderate Tilt (Example)

List of Tables

  1. Chapter 3: Experts Are Biased and Overconfident
    1. Table 3.1 Ten Question Overconfidence Test
  2. Chapter 4: Experts Tell Us Stories, Not Facts
    1. Table 4.1 Performance of Dallas Cowboy Victory Signal (2000 to 2013)
    2. Table 4.2 Performances of the Three Strategies
  3. Chapter 5: A Framework for Investment Decisions
    1. Table 5.1 MainStay S&P 500 Index Fund Performance as of December 5, 2014
    2. Table 5.2 Fund Fees over Time (1980 to 2006)
    3. Table 5.3 Hedge Fund Fees over Time (1996 to 2007)
    4. Table 5.4 Hedge Fund Lockup Periods
    5. Table 5.5 Tax Rate Increases from 2012 to 2013
  4. Chapter 6: A Simple Asset Allocation Model That Works
    1. Table 6.1 Summary Statistics
    2. Table 6.2 Tangency and Minimum Variance Portfolio Weights
    3. Table 6.3 Equal-Weight, Tangency, and Minimum-Variance Performance
    4. Table 6.4 Summary Statistics of Three Strategies
    5. Table 6.5 Asset Allocation Models Tested
    6. Table 6.6 Datasets Considered
    7. Table 6.7 Asset Allocation Models Empirical Results—Sharpe Ratios
  5. Chapter 7: A Simple Risk Management Model That Works
    1. Table 7.1 Example Simple Moving Average Calculation
    2. Table 7.2 Example Time Series Momentum Calculation
    3. Table 7.3 Summary Statistics for IVY 5 (1/1976–12/2014)
    4. Table 7.4 Time Series Momentum (TMOM) Performance (1/1976–12/2014)
    5. Table 7.5 Moving Average (MA) Performance (1/1976–12/2014)
    6. Table 7.6 MOM VS. MA Performance Comparisons (1/1976–12/2014)
    7. Table 7.7 ROBUST Performance (1/1976–12/2014)
    8. Table 7.8 ROBUST Performance Comparisons (1/1976–12/2014)
    9. Table 7.10 NKY Performance Across Systems (1/1971 to 12/2014)
    10. Table 7.11 DAX Performance Across Systems (1/1961 to 12/2014)
  6. Chapter 8: Simple Security Selection Models That Work
    1. Table 8.1 Value and Growth Stocks Summary Statistics
    2. Table 8.2 Valuation Horserace (7/1963–12/2014)
    3. Table 8.3 Long-Term Valuation Horserace
    4. Table 8.4 High and Low Momentum
    5. Table 8.5 Simple Momentum Example
    6. Table 8.6 Equal Weighted Returns across Varying Hold Periods
    7. Table 8.7 Simple Value and Momentum Annual Results
    8. Table 8.8 Simple Value and Momentum Annual Returns
    9. Table 8.9 Simple Value and Momentum Annual Results
  7. Chapter 9: The Do-It-Yourself (DIY) Solution
    1. Table 9.1 Benchmark Summary Statistics
    2. Table 9.2 Strategy Summary Statistics
    3. Table 9.3 Domestic Equity Summary Statistics (1/1992–12/2014)
    4. Table 9.4 International Equity Summary Statistics (1/1992–12/2014)
    5. Table 9.5 Real Assets and Bonds Summary Statistics (1/1992–12/2014)
    6. Table 9.6 Strategy Summary Statistics (1/1992–12/2014)
    7. Table 9.7 Strategy Summary Statistics (1/1992–12/2014)
    8. Table 9.8 Strategy Summary Statistics (1/1976–12/1991)
    9. Table 9.9 Strategy Summary Statistics (1/1927–12/2014)
    10. Table 9.10 Strategy Summary Statistics (1/1992–12/2014)
    11. Table 9.11 Strategy Summary Statistics (1/1992–12/2014)
    12. Table 9.12 Suggested Vehicles to Deploy DIY