Want to learn about financial markets but did not know where to go? Take a look at these courses Everyone these days gets fascinated by the Sensex, the Nifty and the wild gyrations in stocks. However, many of them do not know the how and why of financial markets. We often receive emails asking...

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Technical Analysis can be academically analysed. The results are as confusing as TA itself There is hardly a financial publication we know of (except this one) that does not offer what is mysteriously called ‘Technical Analysis’ (TA). Even a casual glance at the financial press indicates the...

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There are dozens of awards for the best fund   manager. They may be based on faulty analysis. Is there an alternative? There is enough evidence that over the long term, fund managers engaged in smart stock-picking are not able to do much better than the indices and, therefore, also than the...

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Even hedge funds cannot time the market, points out a recent study. They do plain old stock-picking in a better way It is well-known that hedge funds (meant for institutional investors) beat mutual funds (meant for retail investors) over most periods. How do they do it? Public image and...

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The empirical evidence that small-cap stocks do better than large-cap stocks is thin Do smaller stocks do better than large-caps? Belief is widespread that they do. Mutual funds are bringing a plethora of schemes to buy mid-cap and small-cap stocks. DSP Merrill Lynch is even launching a scheme...

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Private equity has become a massive business. How does it work? How do you invest in companies? You buy shares from the stock market. The big boys do it differently. They buy whole companies with a pool of money, improve the performance of these companies and then get them listed in the stock...

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“Prediction is very difficult, especially if it’s about the future,” said Nils Bohr, Nobel laureate in Physics. A recent study shows that finance heads, who confidently forecast stock movements, are often wrong Sometime in 1997, Ratan Tata invited all the major Telco suppliers to Lucknow to...

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He is being compared with Warren Buffett, has made $1 billion last year and is only 45 At 7.30 in the evening on Friday, 10th January 2003, successful value investor Edward Lampert was leaving his office when he was kidnapped by four people from the parking lot. They took him to Day’s Inn...

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Active vs passive fund management is not the issue. It is whether you can stick to whatever you have chosen when the going gets tough A few issues ago, we highlighted a study by a US research firm Dalbar Inc. which underlined the fact that while funds earn a return that is reflected in the...

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In our last issue, we highlighted the first three of the seven sins of fund management, as described by James Montier, Global Equity Strategist with Dresdner Kleinwort Wasserstein. Here are the other four, starting with the biggest problem with the fund management business -- the assumption that...

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James Montier is a thoughtful person. As a global equity strategist with Dresdner Kleinwort Wasserstein, a top broking firm, he believes in taking an independent approach to understanding all about the investment process. In November 2005, he had written a paper titled “Seven Sins of Management:...

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What you make does not depend on what the fund makes but on how you behave, finds a study on mutual funds It is bad enough that mutual funds have an uphill struggle to beat the indices. What makes the investment returns from funds worse is investors’ own behaviour. A recent study by Dalbar,...

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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...

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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...

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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...

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How much should we expect our equity investments to deliver? Here is a surprising answer Equities always outperform all other asset classes’. ‘Equities are the best form of investment’. ‘If you want to retire rich and early, buy equities’. These are the mantras of financial planners, mutual...

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Each time the market swoons, the media blames it on them and the regulator wants to “legalise” them. What are hedge funds and how do they function? There is a sense of shock and awe in India about hedge funds. What is it that gives these funds such an aura? Just as the seemingly omnipotent...

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Some technical analysts rely on an arcane 13th century arithmetic series, called the Fibonacci sequence. A recent study says that it is false belief Many traders believe that clues to where the market is headed lie in the work of Leonardo of Pisa, a mathematician who lived in the 12th and 13th...

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Debashis Basu points out the lessons for a trader in Amaranth’s $6 billion blow up In late September and early October, Amaranth Advisors, a US-based hedge fund went under. It had a large exposure in the natural gas futures market and was wrong-footed when gas prices tumbled. The total loss? A...

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The world’s second largest hedge fund is run on an interesting philosophy Bridgewater Associates is probably the world’s second largest hedge fund group. Its single-manager fund had assets of $20.9 billion on June 30, 2006 according the magazine Alpha beaten narrowly by Goldman Sachs which had...

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