A Random Walk Down Wall Street · the Time-Tested Strategy for Successful Investing (Eleventh Edition) by Malkiel, Burton G. -- Read -- Imperial Library of Trantor

Index

Title Contents Preface Part One: Stocks and their Value

1. Firm Foundations and Castles in the Air

What Is a Random Walk? Investing as a Way of Life Today Investing in Theory The Firm-Foundation Theory The Castle-in-the-Air Theory How the Random Walk Is to Be Conducted

2. The Madness of Crowds

The Tulip-Bulb Craze The South Sea Bubble Wall Street Lays an Egg An Afterword

3. Speculative Bubbles From the Sixties into the Nineties

The Sanity of Institutions The Soaring Sixties

The New “New Era”: The Growth-Stock/New-Issue Craze Synergy Generates Energy: The Conglomerate Boom Performance Comes to the Market: The Bubble in Concept Stocks

The Nifty Fifty The Roaring Eighties

The Return of New Issues Concepts Conquer Again: The Biotechnology Bubble ZZZZ Best Bubble of All

What Does It All Mean?

The Japanese Yen for Land and Stocks

4. The Explosive Bubbles of the Early 2000s

The Internet Bubble

A Broad-Scale High-Tech Bubble Yet Another New-Issue Craze TheGlobe.com Security Analysts $peak Up New Valuation Metrics The Writes of the Media Fraud Slithers In and Strangles the Market Should We Have Known the Dangers?

The U.S. Housing Bubble and Crash of the Early 2000s

The New System of Banking Looser Lending Standards The Housing Bubble

Bubbles and Economic Activity

Does This Mean That Markets Are Inefficient?

Part Two: How the Pros Play the Biggest Game in Town

5. Technical and Fundamental Analysis

Technical versus Fundamental Analysis What Can Charts Tell You? The Rationale for the Charting Method Why Might Charting Fail to Work? From Chartist to Technician The Technique of Fundamental Analysis Three Important Caveats Why Might Fundamental Analysis Fail to Work? Using Fundamental and Technical Analysis Together

6. Technical Analysis and the Random-Walk Theory

Holes in Their Shoes and Ambiguity in Their Forecasts Is There Momentum in the Stock Market? Just What Exactly Is a Random Walk? Some More Elaborate Technical Systems

The Filter System The Dow Theory The Relative-Strength System Price-Volume Systems Reading Chart Patterns Randomness Is Hard to Accept

A Gaggle of Other Technical Theories to Help You Lose Money

The Hemline Indicator The Super Bowl Indicator The Odd-Lot Theory Dogs of the Dow January Effect A Few More Systems Technical Market Gurus

Why Are Technicians Still Hired? Appraising the Counterattack Implications for Investors

7. How Good is Fundamental Analysis? The Efficient-Market Hypothesis

The Views from Wall Street and Academia Are Security Analysts Fundamentally Clairvoyant? Why the Crystal Ball Is Clouded

1. The Influence of Random Events 2. The Production of Dubious Reported Earnings through “Creative” Accounting Procedures 3. Errors Made by the Analysts Themselves 4. The Loss of the Best Analysts to the Sales Desk, to Portfolio Management, or to Hedge Funds 5. The Conflicts of Interest between Research and Investment Banking Departments

Do Security Analysts Pick Winners? The Performance of the Mutual Funds The Semi-Strong and Strong Forms of the Efficient-Market Hypothesis (EMH)

A Note on High-Frequency Trading (HFT)

Part Three: The New Investment Technology

8. A New Walking Shoe: Modern Portfolio Theory

The Role of Risk Defining Risk: The Dispersion of Returns

Illustration: Expected Return and Variance Measures of Reward and Risk

Documenting Risk: A Long-Run Study Reducing Risk: Modern Portfolio Theory (MPT) Diversification in Practice

9. Reaping Reward By Increasing Risk

Beta and Systematic Risk The Capital-Asset Pricing Model (CAPM) Let’s Look at the Record An Appraisal of the Evidence The Quant Quest for Better Measures of Risk: Arbitrage Pricing Theory The Fama-French Three-Factor Model A Summing Up

10. Behavioral Finance

The Irrational Behavior of Individual Investors

Overconfidence Biased Judgments Herding Loss Aversion Pride and Regret

Behavioral Finance and Savings The Limits to Arbitrage What Are the Lessons for Investors from Behavioral Finance?

1. Avoid Herd Behavior 2. Avoid Overtrading 3. If You Do Trade: Sell Losers, Not Winners 4. Other Stupid Investor Tricks

Does Behavioral Finance Teach Ways to Beat the Market?

11. Is “Smart Beta” Really Smart?

What Is “Smart Beta”? Four Tasty Flavors: Their Pros and Cons

1. Value Wins 2. Smaller Is Better 3. Momentum and Reversion to the Mean 4. Low Volatility Can Produce High Returns Blended Flavors and Strategies

“Smart Beta” Funds Flunk the Risk Test

Appraisal of “Smart Beta”

How Well Have Factor Tilts Worked in Practice?

Value and Size Tilts

Blended Hybrid Strategies

Research Affiliates Fundamental Index™ (RAFI) Equally Weighted Portfolio Strategies

Other Factor Tilts

Low-Beta (Low-Volatility) Strategies Momentum Strategies

Implications for Investors Implications for Believers in Efficient Markets Capitalization-Weighted Indexing Remains at the Top of the Class

Part Four: A Practical Guide For Random Walkers and Other Investors

12. A Fitness Manual For Random Walkers and Other Investors

Exercise 1: Gather the Necessary Supplies Exercise 2: Don’t Be Caught Empty-Handed: Cover Yourself with Cash Reserves and Insurance

Cash Reserves Insurance Deferred Variable Annuities

Exercise 3: Be Competitive—Let the Yield on Your Cash Reserve Keep Pace with Inflation

Money-Market Mutual Funds (Money Funds) Bank Certificates of Deposit (CDs) Internet Banks Treasury Bills Tax-Exempt Money-Market Funds

Exercise 4: Learn How to Dodge the Tax Collector

Individual Retirement Accounts Roth IRAs Pension Plans Saving for College: As Easy as 529

Exercise 5: Make Sure the Shoe Fits: Understand Your Investment Objectives Exercise 6: Begin Your Walk at Your Own Home—Renting Leads to Flabby Investment Muscles Exercise 7: How to Investigate a Promenade through Bond Country 315

Zero-Coupon Bonds Can Be Useful to Fund Future Liabilities No-Load Bond Funds Can Be Appropriate Vehicles for Individual Investors Tax-Exempt Bonds Are Useful for High-Bracket Investors Hot TIPS: Inflation-Indexed Bonds Should You Be a Bond-Market Junkie? Foreign Bonds

Exercise 7A: Use Bond Substitutes for Part of the Aggregate Bond Portfolio during Eras of Financial Repression Exercise 8: Tiptoe through the Fields of Gold, Collectibles, and Other Investments Exercise 9: Remember That Investment Costs Are Not Random; Some Are Lower Than Others Exercise 10: Avoid Sinkholes and Stumbling Blocks: Diversify Your Investment Steps A Final Checkup

13. Handicapping the Financial Race: A Primer in Understanding and Projecting Returns From Stocks and Bonds

What Determines the Returns from Stocks and Bonds? Four Historical Eras of Financial Market Returns Era I: The Age of Comfort Era II: The Age of Angst Era III: The Age of Exuberance Era IV: The Age of Disenchantment The Markets from 2009 through 2014 Handicapping Future Returns

14. A Life-Cycle Guide to Investing

Five Asset-Allocation Principles

1. Risk and Reward Are Related 2. Your Actual Risk in Stock and Bond Investing Depends on the Length of Time You Hold Your Investment 3. Dollar-Cost Averaging Can Reduce the Risks of Investing in Stocks and Bonds 4. Rebalancing Can Reduce Investment Risk and Possibly Increase Returns 5. Distinguishing between Your Attitude toward and Your Capacity for Risk

Three Guidelines to Tailoring a Life-Cycle Investment Plan

1. Specific Needs Require Dedicated Specific Assets 2. Recognize Your Tolerance for Risk 3. Persistent Saving in Regular Amounts, No Matter How Small, Pays Off

The Life-Cycle Investment Guide Life-Cycle Funds Investment Management Once You Have Retired

Inadequate Preparation for Retirement

Investing a Retirement Nest Egg

Annuities

The Do-It-Yourself Method

15. Three Giant Steps Down Wall Street

The No-Brainer Step: Investing in Index Funds

The Index-Fund Solution: A Summary A Broader Definition of Indexing A Specific Index-Fund Portfolio ETFs and Taxes

The Do-It-Yourself Step: Potentially Useful Stock-Picking Rules

Rule 1: Confine stock purchases to companies that appear able to sustain above-average earnings growth for at least five years Rule 2: Never pay more for a stock than can reasonably be justified by a firm foundation of value Rule 3: It helps to buy stocks with the kinds of stories of anticipated growth on which investors can build castles in the air Rule 4: Trade as little as possible

The Substitute-Player Step: Hiring a Professional Wall Street Walker The Morningstar Mutual-Fund Information Service The Malkiel Step A Paradox Investment Advisers Some Last Reflections on Our Walk A Final Word

A Random Walker’s Address Book and Reference Guide to Mutual Funds and ETFs Acknowledgments from Earlier Editions Index Copyright

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