Value Investing News - Behavioral Finance - Comments

So true...

forex — Tue, 25 Nov 2008 16:47:46 -0500

There will always be ups and downs...

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Good to know...

forex — Tue, 21 Oct 2008 13:56:11 -0400

Good to know the differing lines of thought here...

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I really appreciated

George — Fri, 03 Oct 2008 21:54:49 -0400

I really appreciated the income elasticities of demand table included in this article. I'm an econ nerd at heart and I really connected with the explanation given for why airlines are bad investments.

CFA Institute webcasts

George — Fri, 28 Dec 2007 08:16:58 -0500

Thanks for sharing links to these CFA Institute webcasts. I'm currently reading Zweig's new book, so this particular presentation was of interest to me. This are really nicely produced webcasts that include both video and slide presentations.

There are many free pieces

SilverSlime — Thu, 27 Dec 2007 18:44:04 -0500

There are many free pieces in the CFA Institute webcast. I pick some of them that I think are related to value investing.

Happy Holiday & New Year ! ^_^

Thank you Nick

CrossProfit — Sat, 15 Sep 2007 06:42:08 -0400

Thanks for bringing MSTR to our attention.

As an aside, we are all too much aware of emotional decisions at CrossProfit. Never a good idea to make 'rash' decisions.

Common Sense Investing

Nick — Thu, 28 Jun 2007 23:38:50 -0400

I just finished reading The Little Book of Common Sense Investing by John Bogle thanks to Wiley & Sons and VIN. I was surprised by the book. Though I knew the majority of investment professionals didn't beat the market over the long term, Mr. Bogle made the S&P 500 seem as powerful as gravity.

Prior to reading the Intelligent Investor I was an index investor. I had invested in VFINX for a number of years, always knowing that when I had more time I wanted to learn how to "really" invest. Well I've been "really" investing for a few years now and have improved considerably in the last year.

That said, I feel it is time to take a look at my progress and I'm going to compare it to the S&P 500 and I'm going to account for fees and the drag of cash (Ouch sometime I have 30-40% in cash). Should I use money or time weighted returns to judge my investing prowess? I know funds use time weighted, but I control my cash inflows and outflow to a large degree would money weighted be better in this case?

Very Fisher-esque, ccyork.

Jason — Mon, 04 Jun 2007 22:23:51 -0400

Very Fisher-esque, ccyork.

Very good one. I find myself

Jason — Fri, 04 May 2007 22:09:26 -0400

Very good one. I find myself constantly looking for new holding instead of evaluating my current holdings. I need to take some hard looks this weekend. But, I think I am better off holding with the lack of under appreciated securities out there currently.

Here is a link to Ed Thorp's

Nick — Mon, 16 Apr 2007 12:31:27 -0400

Here is a link to Ed Thorp's paper that Max refers to:

THE KELLY CRITERION IN BLACKJACK, SPORTS
BETTING, AND THE STOCK MARKET

Kelly formula

Max — Mon, 16 Apr 2007 11:48:09 -0400

I have done a good deal of research on the Kelly Criterion in the past. Anyone who is interested should read the papers by John Kelly and Ed Thorp (In Thorp's paper he talks about applying the model to Berkshire Hathaway stock), and the books "Fortune's Formula" and "In An Uncertain World". This is the Robert Rubin book mentioned above, which is great for thinking about probabilities.

Using the formula Mauboussin states(Edge/Odds)only works if you are making one investment at a time, and if you lose - it is a total 100% loss. In reality, when you have multiple investment options with multiple different outcomes, you can create a computer model that will give you the various bet sizes for each investment. This is much more complex than it needs to be but it is a good exercise in capital allocation.

Pabrai's method in the book (obtaining the single bet sizes and averaging them out over 8 investments) is not the way it is actually done, but again it can be a useful exercise. I think the best advice Pabrai gives is to always bet below the Kelly percentage, not only because it lowers volatility (like other authors have stated) but because no one knows the what the exact probabilities are and it's better to be conservative.

If you think about it, the probabilities of different outcomes are really the entire basis for making an investment in the first place. "Valuation" is simple and almost anyone can do it. This is why Buffett and Munger are so good - using their mental models, they are extremely good at estimating odds in various scenarios.

Figuring the odds with Kelly

bingopitts — Mon, 16 Apr 2007 11:01:29 -0400

Predicting the odds with Kelly is of course just a guess. But what it does is to make one think about the probabilty of a likely outcome. Robert Rubin talks about this in his book "In an uncertain world".

I think Kelly makes one think in a probabilistic context.

I agree with you that it is

George — Sun, 15 Apr 2007 17:13:41 -0400

I agree with you that it is more art than science. This is where your gut comes into play.

This is nice theory however

random_walker — Sun, 15 Apr 2007 15:30:12 -0400

This is nice theory however in my mind sizing portfolio positions is more art than science.

Applying the Kelly Formula

George — Sun, 15 Apr 2007 13:30:22 -0400

That was an interesting read. Now how does one actually apply these theories? How can we estimate the odds? I already understand the common sense that you should bet a larger portion of your funds when you think you have an outsized advantage in the odds. The question comes down to measuring the odds advantage.