A Random Walk Down Wall Street

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
			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?
		The Bubble in Cryptocurrencies
			Bitcoin and Blockchain
		Is Bitcoin Real Money?
		Should the Bitcoin Phenomenon Be Called a Bubble?
		What Can Make the Bitcoin Bubble Deflate?
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
		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)
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. New Methods of Portfolio Construction: Smart Beta and Risk Parity
		What is “Smart Beta”?
		Four Tasty Flavors: Their Pros and Cons
			1. Value Wins
			2. Smaller Is Better
			3. There is Some Momentum in the Stock Market
			4. Low-Beta Stocks Return as Much as High-Beta Stocks
			What Could Go Wrong?
			Blended Factor Strategies
		Blended Funds in Practice
			Dimensional Fund Advisors (DFA)
			Research Affiliates Fundamental Index™ (RAFI)
			Goldman Sachs Active Beta ETF
			Equally-Weighted Portfolios
		Implications for Investors
		Risk Parity
			The Risk-Parity Technique
			Safe Bonds May Also Provide Opportunities to Employ Risk-Parity Techniques
			Risk Parity versus the Traditional 60/40 Portfolio
			Dalio’s All Weather Fund
			What Could Go Wrong?
		Concluding Comments
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
			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-Protected 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 to 2018
		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
		Investment Advisers, Standard and Automated
		Some Last Reflections on Our Walk
		A Final Example
		Epilogue
A Random Walker’s Address Book and Reference Guide to Mutual Funds and ETFs
Acknowledgments
Index
Copyright