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Title: What Works on Wall Street: A Guide to the Best-Performing Investment Strategies of All Time by James P. O'Shaughnessy ISBN: 0-07-048246-2 Publisher: McGraw-Hill Trade Pub. Date: 31 May, 1998 Format: Hardcover Volumes: 1 List Price(USD): $29.95 |
Average Customer Rating: 3.62 (48 reviews)
Rating: 5
Summary: Enlightening
Comment: The book WHAT WORKS ON WALL STREET provides powerful information for the long term investor. Not only does it set in stone the necessary disciplines for successful investing, it does so in a commonsense, low cost method(rebalance annually), dismissing active portfolio management as a viable option for a personal investor while maintaining proven investment strategies tested through market cycles. This strategy will continue to work over time(even as more and more people read this book)because, quite honestly, it is boring and over the long run, most will fail to maintain the strategies outlined in this book.
Caveat: The author uses the top 50 stocks to create a portfolio of stocks within a strategy. This is most likely too many stocks for the average investor(too much money). You may be forced to select stocks from within the 50 stock portfolio with the understanding that the top stocks are not always the best performing. Therefore, further research may be required in order to select stocks within the 50 stock portfolio that match your available funds. For example, If you have a $100,000 portfolio, you will not cost effectively be able to purchase the top 50 stocks, you will be forced to select 5 to 15 companies from within the 50 stock portfolio...Question: Which stocks?
Rating: 2
Summary: What doesn't work on Wall St.
Comment: This book is just another example of why non-statisticians shouldn't write books on statistical subjects. It's best-selling status confirms P.T.Barnum's famous phrase.
What the author does is use year-end prices covering 45 years to "prove" all sorts of useless things about various simple strategies centering around value investing. Forty-five data points, whether it be daily data or yearly data, is not enough (by more than at least a factor of ten!) to reach any significant conclusion about anything such as the financial markets, where any signal present is swamped by noise. But O'Shaughnessy is quite tickled that he's proven all the experts wrong with his measly sample.
What's even worse is that the spuriousness of his "profound" results is right there staring him in his face: he frequently comes up with numbers like 14.59%, with a standard deviation of 23.24% -- not realizing that this means the real answer is likely anywhere between -8.65% and +37.83%; in other words, it's consistent with a 0% return for that particular strategy. To compound the folly, O'Shaughnessy then goes on to continually draw conclusions based on differences of a few percent or less (a small fraction of the standard deviation) between competing strategies, not realizing that this is utterly meaningless.
On top of these fatal flaws, O'Shaughnessy also commits the most common sin of model testing: he fails to forward-test his strategy on data which the model hasn't yet seen. This just about guarantees that future results will disappoint, as indeed has been the case the last several years with the mutual funds which he launched based on the ideas in this book after its first edition.
I give it 1 1/2 - 2 stars because even a crummy strategy is better than none at all.
Rating: 3
Summary: Take with a grain of salt...
Comment: The key findings of O'Shaughnessy are the slight superiority of returns for small cap stocks and larger excess returns for value stocks, and therefore the combination of both is ideal.
Of course, Ben Graham said this 70 years ago but approached the topic from the bottom up, while this book analyzes top-down.
I would however steer cleer of his idea about relative price momentum that he claims does 18.11% a year. Note that O'Shaughnessy started several funds, which did absolutely miserably and then he jumped ship having made a small fortune in book sales.
Read this book, but read Graham&Dodd as well.
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Title: How to Retire Rich: Time-Tested Strategies to Beat the Market and Retire in Style by James O'Shaughnessy, James O'Shaughnessy ISBN: 0767900731 Publisher: Bantam Books Pub. Date: 29 December, 1998 List Price(USD): $14.00 |
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Title: Invest Like The Best, Book with Diskette by James P. O'Shaughnessy ISBN: 0079137547 Publisher: McGraw-Hill Trade Pub. Date: 01 January, 1998 List Price(USD): $16.95 |
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Title: The Warren Buffett Way, : Investment Strategies of the World's Greatest Investor by Robert G. Hagstrom ISBN: 0471177504 Publisher: John Wiley & Sons Pub. Date: March, 1997 List Price(USD): $9.99 |
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Title: Beating the Street by Peter Lynch ISBN: 0671891634 Publisher: Simon & Schuster Pub. Date: 25 May, 1994 List Price(USD): $15.00 |
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Title: How To Make Money In Stocks: A Winning System in Good Times or Bad, 3rd Edition by William J. O'Neil ISBN: 0071373616 Publisher: McGraw-Hill Trade Pub. Date: 23 May, 2002 List Price(USD): $12.95 |
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