Random Walk 9E Pa

by Malkiel,Burton G.

• ISBN13: 9780393330335
• ISBN10: 0393330338
• Edition: 9th
• Format: Paperback
• Copyright: 2007-12-17
• Publisher: W. W. Norton & Company

Summary

Whether you're considering your first 401(k) contribution, contemplating retirement, or anywhere in between, A Random Walk Down Wall Street should be the first book on your reading list. In this newest edition of the perennial bestseller, Burton G. Malkiel shows how to navigate the turbulence on Wall Street and beat the pros at their own game, giving individual investors the information, they need to manage their money with confidence. Book jacket.

Author Biography

Burton G. Malkiel is a former member of the Council of Economic Advisers and has served on the boards of several major corporations, including the Vanguard Group of Investment Companies and Prudential Financial Corporation

Table of Contents

Preface	p. 15
Acknowledgments from Earlier Editions	p. 19
Stocks and Their Value
Firm Foundations and Castles in the Air	p. 23
What Is a Random Walk?	p. 24
Investing as a Way of Life Today	p. 26
Investing in Theory	p. 28
The Firm-Foundation Theory	p. 28
The Castle-in-the-Air Theory	p. 30
How the Random Walk Is to Be Conducted	p. 33
The Madness of Crowds	p. 34
The Tulip-Bulb Craze	p. 35
The South Sea Bubble	p. 38
Wall Street Lays an Egg	p. 44
An Afterword	p. 51
Stock Valuation from the Sixties through the Nineties	p. 52
The Sanity of Institutions	p. 52
The Soaring Sixties	p. 53
The New "New Era": The Growth-Stock/New-Issue Craze	p. 53
Synergy Generates Energy: The Conglomerate Boom	p. 56
Performance Comes to the Market: The Bubble in Concept Stocks	p. 63
The Sour Seventies	p. 66
The Nifty Fifty	p. 66
The Roaring Eighties	p. 68
The Triumphant Return of New Issues	p. 68
Concepts Conquer Again: The Biotechnology Bubble	p. 70
ZZZZ Best Bubble of All	p. 71
What Does It All Mean?	p. 73
The Nervy Nineties	p. 74
The Japanese Yen for Land and Stocks	p. 74
The Biggest Bubble of All: Surfing on the Internet	p. 78
How Bubbles Arise	p. 78
A Broad-Scale High-Tech Bubble	p. 80
An Unprecedented New-Issue Craze	p. 82
TheGlobe.com	p. 84
Security Analysts $peak Up	p. 86
New Valuation Metrics	p. 87
The Writes of the Media	p. 89
Fraud Slithers In and Strangles the Market	p. 92
Should We Have Known the Dangers?	p. 94
A Final Word	p. 96
How the Pros Play the Biggest Game in Town
Technical and Fundamental Analysis	p. 99
Technical versus Fundamental Analysis	p. 100
What Can Charts Tell You?	p. 102
The Rationale for the Charting Method	p. 105
Why Might Charting Fail to Work?	p. 107
From Chartist to Technician	p. 108
The Technique of Fundamental Analysis	p. 109
Three Important Caveats	p. 117
Why Might Fundamental Analysis Fail to Work?	p. 120
Using Fundamental and Technical Analysis Together	p. 121
Technical Analysis and the Random-Walk Theory	p. 126
Holes in Their Shoes and Ambiguity in Their Forecasts	p. 126
Is There Momentum in the Stock Market?	p. 128
Just What Exactly Is a Random Walk?	p. 129
Some More Elaborate Technical Systems	p. 133
The Filter System	p. 133
The Dow Theory	p. 134
The Relative-Strength System	p. 134
Price-Volume Systems	p. 135
Reading Chart Patterns	p. 135
Randomness Is Hard to Accept	p. 136
A Gaggle of Other Technical Theories to Help You Lose Money	p. 138
The Hemline Indicator	p. 138
The Super Bowl Indicator	p. 140
The Odd-Lot Theory	p. 140
A Few More Systems	p. 141
Technical Market Gurus	p. 142
Why Are Technicians Still Hired?	p. 144
Appraising the Counterattack	p. 145
Implications for Investors	p. 148
How Good Is Fundamental Analysis?	p. 150
The Views from Wall Street and Academia	p. 151
Are Security Analysts Fundamentally Clairvoyant?	p. 152
Why the Crystal Ball Is Clouded	p. 155
The Influence of Random Events	p. 156
The Production of Dubious Reported Earnings through "Creative" Accounting Procedures	p. 156
The Basic Incompetence of Many of the Analysts Themselves	p. 159
The Loss of the Best Analysts to the Sales Desk, to Portfolio Management, or to Hedge Funds	p. 160
The Conflicts of Interest between Research and Investment Banking Departments	p. 161
Do Security Analysts Pick Winners?-The Performance of the Mutual Funds	p. 164
Can Any Fundamental System Pick Winners?	p. 170
The Verdict on Market Timing	p. 171
The Semi-strong and Strong Forms of the Efficient-Market Theory	p. 172
The Middle of the Road: A Personal Viewpoint	p. 174
The New Investment Technology
A New Walking Shoe: Modern Portfolio Theory	p. 179
The Role of Risk	p. 180
Defining Risk: The Dispersion of Returns	p. 181
Illustration: Expected Return and Variance Measures of Reward and Risk	p. 181
Documenting Risk: A Long-Run Study	p. 184
Reducing Risk: Modern Portfolio Theory (MPT)	p. 186
Diversification in Practice	p. 190
Reaping Reward by Increasing Risk	p. 197
Beta and Systematic Risk	p. 198
The Capital-Asset Pricing Model (CAPM)	p. 201
Let's Look at the Record	p. 206
An Appraisal of the Evidence	p. 209
The Quant Quest for Better Measures of Risk: Arbitrage Pricing Theory	p. 211
A Summing Up	p. 214
Behavioral Finance	p. 216
The Irrational Behavior of Individual Investors	p. 219
Overconfidence	p. 219
Biased Judgments	p. 222
Herding	p. 225
Loss Aversion	p. 229
The Limits to Arbitrage	p. 233
What Are the Lessons for Investors from Behavioral Finance?	p. 237
Avoid Herd Behavior	p. 238
Avoid Overtrading	p. 240
If You Do Trade: Sell Losers, Not Winners	p. 241
Other Stupid Investor Tricks	p. 242
Does Behavioral Finance Teach Ways to Beat the Market?	p. 243
Potshots at the Efficient-Market Theory and Why They Miss	p. 244
What Do We Mean by Saying Markets Are Efficient?	p. 246
Potshots That Completely Miss the Target	p. 247
Dogs of the Dow	p. 247
January Effect	p. 248
"Thank God It's Monday Afternoon" Pattern	p. 249
Hot News Response	p. 249
Why the Aim Is So Bad	p. 250
Potshots That Get Close but Still Miss the Target	p. 251
The Trend Is Your Mend (Otherwise Known as Short-Term Momentum) 251 The Dividend Jackpot Approach	p. 253
The Initial P/E Predictor	p. 255
The "Back We Go Again" Strategy (Otherwise Known as Long-Run Return Reversals)	p. 256
The "Smaller Is Better" Effect	p. 259
The "Value Will Win" Record	p. 261
Stacks with Low Price-Earnings Multiples Outperform Those with High Multiples	p. 262
Stocks That Sell at Low Multiples of Their Book Values Tend to Produce Higher Subsequent Returns	p. 263
But Does "Value" Really Trump Growth on a Consistent Basis?	p. 264
Why Even Close Shots Miss	p. 265
And the Winner Is...	p. 267
The Performance of Professional Investors	p. 267
A Summing Up	p. 271
A Practical Guide for Random Walkers and Other Investors
A Fitness Manual for Random Walkers	p. 277
Gather the Necessary Supplies	p. 278
Don't Be Caught Empty-Handed: Cover Yourself with Cash Resources and Insurance	p. 280
Cash Reserves	p. 280
Insurance	p. 280
Deferred Variable Annuities	p. 282
Be Competitive-Let the Yield on Your Cash
Reserve Keep Pace with Inflation	p. 283
Money-Market Mutual Funds	p. 283
Bank Certificates of Deposit (CDs)	p. 283
Internet Banks	p. 284
Treasury Bills	p. 285
Tax-Exempt Money-Market Funds	p. 285
Learn How to Dodge the Tax Collector	p. 286
Individual Retirement Accounts	p. 286
Roth IRAs	p. 288
Pension Plans	p. 289
Saving for College: As Easy as 529	p. 290
Make Sure the Shoe Fits: Understand Your Investment Objectives	p. 291
Begin Your Walk at Your Own Home-Renting Leads to Flabby Investment Muscles	p. 298
Investigate a Promenade through Bond Country	p. 300
Zero-Coupon Bonds Can Generate Large Future Returns	p. 301
No-Load Bond Funds Are Appropriate Vehicles for Individual Investors	p. 302
Tax-Exempt Bonds Are Useful for High-Bracket Investors	p. 302
Hot Tips: Inflation-Indexed Bonds	p. 304
Should You Be a Bond-Market Junkie?	p. 305
Tiptoe through the Fields of Gold, Collectibles, and Other Investments	p. 306
Remember That Commission Costs Are Not Random; Some Are Cheaper than Others	p. 308
Avoid Sinkholes and Stumbling Blocks: Diversify Your Investment Steps	p. 309
A Final Checkup	p. 310
Handicapping the Financial Race: A Primer in Understanding and Projecting Returns from Stocks and Bonds	p. 312
What Determines the Returns from Stocks and Bonds?	p. 312
Three Eras of Financial Market Returns	p. 316
The Age of Comfort	p. 317
The Age of Angst	p. 319
The Age of Exuberance	p. 323
The Age of the Millennium	p. 325
A Life-Cycle Guide to Investing	p. 329
Five Asset-Allocation Principles	p. 330
Risk and Reward Are Related	p. 330
Your Actual Risk in Stock and Bond Investing Depends on the Length of Time You Hold Your Investment	p. 331
Dollar-Cost Averaging Can Reduce the Risks of Investing in Stocks and Bonds	p. 334
Rebalancing Can Reduce Investment Risk and Possibly Increase Returns	p. 338
Distinguishing between Your Attitude toward and Your Capacity for Risk	p. 340
Three Guidelines to Tailoring a Life-Cycle Investment Plan	p. 342
Specific Needs Require Dedicated Specific Assets	p. 342
Recognize Your Tolerance for Risk	p. 343
Persistent Saving in Regular Amounts, No Matter How Small, Pays Off	p. 343
The Life-Cycle Investment Guide	p. 345
Life-Cycle Funds	p. 348
Investment Management Once You Have Retired	p. 349
Inadequate Preparation for Retirement	p. 349
Investing a Retirement Nest Egg	p. 350
Annuities	p. 351
The Do-It-Yourself Method	p. 354
Three Giant Steps Down Wall Street	p. 357
The No-Brainer Step: Investing in Index Funds	p. 358
The Index-Fund Solution: A Summary	p. 360
A Broader Definition of Indexing	p. 363
A Specific Index-Fund Portfolio	p. 366
ETFs and the Tax-Managed Index Fund	p. 367
The Do-It-Yourself Step: Potentially Useful Stock-Picking Rules	p. 369
Confine stock purchases to companies that appear able to sustain above-average earnings growth for at least five years	p. 370
Never pay more for a stock than can reasonably be justified by a firm foundation of value	p. 370
It helps to buy stocks with the kinds of stories of anticipated growth on which investors can build castles in the air	p. 371
Trade as little as possible	p. 372
The Substitute-Player Step: Hiring a Professional Wall Street Walker	p. 373
The Morningstar Mutual-Fund Information Service	p. 375
A Primer on Mutual-Fund Costs	p. 376
Loading Fees	p. 377
Expense Charges	p. 377
Turnover Costs	p. 378
The 50-50 Rule	p. 379
The Malkiel Step	p. 379
A Paradox	p. 383
Some Last Reflections on Our Walk	p. 384
Supplement: How Pork Bellies Acquired an Ivy League Suit: A Primer on Derivatives	p. 387
Appendix to Supplement: What Determines Prices in the Futures and Options Markets?	p. 420
A Random Walker's Address Book and Reference Guide to Mutual Funds	p. 427
Index	p. 437
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