Sign In
SHARE
Fundamental Analysis Is Useless
Barry Ritholtz reads Mark Hulbert, and saves the rest of us a Barron's subscription. Apparently Hulbert has learned four big lessons over the past 27 years following investment newsletters. Number two is the one which astonishes me:
Lesson #2: There is more than one road to riches
Hulbert looks at these intractable investment questions:
• Is fundamental analysis better than technical analysis?
• Is successful market timing possible?
• Is buy-and-hold better than in-and-out trading?
If someone asked me these "intractable investment questions", it would take me about, oh, two seconds to answer "yes, no, and yes". Hulbert, however, isn't so sure:
After studying Newsletter writers for twenty-seven, he notes he is "no closer to answering these questions" than when he started. However, he did discover the following:
Over the last 27 years, the top performing newsletter advocates the long-term buying and holding of good quality stocks. No surprise, considering that 20 of the 27 years were a bull market.
But consider that the second-place newsletter involves a combination of both fundamental and technical analysis, as well as market timing. The average holding period of its recommended stocks is less than six months. And in third and fourth place are newsletters whose approaches are based exclusively on technical analysis.
I find this fascinating, and from it I draw one main conclusion: that fundamental analysis is about as useful as technical analysis, i.e. not at all. You can look at fundamentals and minimize your trading costs all you like, but ultimately the market is smarter than you are, or else the market just doesn't respond to fundamentals in the way you think it should.
Or, in three words: buy the index.
Loading...
Thank you for registering as a Portfolio.com Insider. Your comment has been added.
Create Your Public Profile
- The Times' Rorshach Geithner Story
- Apr 27 2009 9:26AM EDT
- Sinking Animal Spirits
- Apr 27 2009 8:45AM EDT
- Counter-cyclical Urban Policy
- Apr 26 2009 10:00AM EDT
- Be Your Own Counterfeiter
- Apr 26 2009 9:36AM EDT
- Being Tim Geithner
- Apr 25 2009 12:37PM EDT
- Notes From a Press Conference Naif
- Apr 25 2009 9:41AM EDT
- What Good is the News?
- Apr 25 2009 8:32AM EDT
- Stressful Enough
- Apr 24 2009 2:29PM EDT
- Not Regretting the Pound
- Apr 24 2009 1:09PM EDT
- Introducing the New Ford Squeeze
- Apr 24 2009 9:47AM EDT
- Non-Economic Questions of the Day
- Apr 24 2009 9:12AM EDT
- The Stress Test Blind Alley
- Apr 24 2009 8:36AM EDT
- Happy Hour
- Apr 23 2009 9:40PM EDT
- Recovery Without Rebalancing
- Apr 23 2009 6:13PM EDT
- The Shape of Your Recession
- Apr 23 2009 5:11PM EDT
Archive
Categories
Links
- Email Ryan Avent
- Econospeak
- Financial Crookery
- The Epicurean Dealmaker
- Naked Capitalism
- Alphaville
- Marginal Revolution
- The Panelist
- FP Passport
- Overcoming Bias
- Andrew Leonard
- Barry Ritholtz
- Brad Setser
- Carbon Tax Center
- Calculated Risk
- Greg Mankiw
- Free Exchange
- Dean Baker
- Alexander Campbell
- Kash Mansori
- The Bayesian Heresy
- A Fistful of Euros
- John Quiggin
- Michael Mandel
- Lance Knobel
- Mark Thoma
- Dan Gross
- Curbed
- Streetsblog
- Chris Anderson
- Deal Journal
- MarketBeat
- DealBook
- DealBreaker
- Carl Bialik
- Michelle Leder
- Brad DeLong
- Ultimi Barbarorum
