LEARNING


Debashis Basu sketches how a mathematician runs the word’s most successful hedge fund In our last issue we profiled Jim Simons, one of the most successful traders of the world, who remains virtually unknown even in his own country. His firm, Renaissance Technologies, is intensely secretive even...

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The “best money manager on earth” is a mathematician, says Debashis Basu "T"he advantage scientists bring into the game is less their mathematical or computational skills than their ability to think scientifically. They are less likely to accept an apparent winning strategy that might be a mere...

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What has a statistical tool called multivariate analysis got to do with understanding where the stock market is headed, asks Debashis Basu In the last issue, I initiated the thought that very little seems to have changed in the world of stock markets. Over the past 300 years of stock trading,...

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In 300 years of human evolution, stock markets lagged behind other streams of activity. This awareness helps one to make successful investments, says Debashis Basu When you buy a call option of Tisco, you are buying a financial instrument that has been in use for centuries of a company that is...

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“Earnings will be good and therefore stocks will go up”. The market trashes this kind of facile short-term punditry of media and brokers time and again. But few investors seem to be bothered For weeks before the earnings’ season began, the entire media, especially the television media, has been...

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The line between “long-term investment” and speculation is thinner than you think, says Debashis Basu “The market can stay irrational longer than you can stay solvent” - John Maynard Keynes “One of the world’s most famous speculators, Warren Buffet, … .” - Victor Niederhoffer in The Education...

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Is your “long-term investment” just another form of speculation, asks Debashis Basu You buy an apartment or a house to live in or to rent it out and earn some income. It may give you great pleasure to check about the resale value from time to time but you have not bought the house to flip it...

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Surprisngly, belying conventional wisdom, the link is too tenuous, points out Debashis Basu It is the most commonly used tool in the market. And often it is useless. If there is any consensus about investing tools in the stock market, it is two magical letters PE. From the most informed fund...

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If you want to be a serious investor, start with a serious study of market history. It will surprise you how risky equities are, says Debashis Basu In the third week of May, thousands of housewives, college students and new part-time traders felt a rude shock. As the Sensex collapsed by over...

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There is a desperate rush to raise money through IPOs to fund huge business leaps. In the past, this has led to major disappointments One of the enduring ironies is that companies need to raise money to grow but the moment they do that, performance and stock prices take a beating. This is so...

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Earnings determine a stock's value, right? Yes, but here is a surprising twist... We are in the middle of earnings season. According to MoneyLIFE's model, earnings momentum is one of the three key elements of equity valuation. The commonest way to link earnings to price is to use P/E, which is...

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Three factors to consider while measuring a fund’s performance Distributors of mutual funds nudge you to invest in schemes that have come to the market yesterday. Sell the one where your returns have been high and jump into the new ones. Or they show you a menu of schemes that have generated...

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A company's stock price is guided by its performance. But what are the key performance measures and how to interpret them? The performance measures are many. Experts on TV breezily talk about earnings per share or sometimes operating profit, but little else. Rarely, will you hear about free...

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The third approach to investing is the most scientific, says Debashis Basu In almost every forum you hear about two approaches to stock picking. One is identifying whether a stock is undervalued or overvalued based on fundamental factors such as cash flows, assets and earnings. The second...

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Financial Theory rests on four pillars. The pillars are shaky, says Debashis Basu When you pass out with a finance degree what are the most important ideas on markets and finance you get indoctrinated on? There are four key interconnected ideas that are supposed to form the theoretical bedrock...

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