Eyes Wide Shut

Why do investors latch on to past performance of funds even though it has little correlation with the future? Debashis Basu explains

In our last issue, we discussed how a study by Litman/Gregory Fund Advisors (LGFA) “failed to unearth a significant positive correlation between past relative performance and future relative performance.” However, the idea that the past gets repeated is firmly...

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  • Past Is Truly No Guide

    Fund companies are asked to mention that past performance is no guide to the future. Just as well, shows a new study

    Investors and fund professionals mainly rely on past performance in fund selection. But is this logical? If so, why do regulators insist that funds must be sold with the caveat that past performance is no guide to the future? Indeed, this caveat is a rare piece of wisdom coming...

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  • Stock Operators

    Stock operators sometimes play an important role in making prices move. They are the least understood part of the market, explains Debashis Basu

    Often the stock of a company suddenly shoots up for no apparent reason. The media are usually clueless too, ascribing flimsy reasons to explain the phenomenon. The message boards of stock sites buzz with wild rumours. The stock’s move baffles even...

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