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Robert (Bob) Arthur Haugen (June 26, 1942 – January 6, 2013) was a renowned professor of theoretical finance. He is currently retired from academics and is the president of Haugen Custom Financial Systems.
The Inefficient Stock Market - What Pays Off And Why (1999)
- Although efficient markets people still go around saying there is a "mountain" of evidence supporting their hypothesis, the truth of the matter is that it's a very old mountain that's now eroding rapidly into the sea.
- Chapter 1, Introduction, p. 2
- CAPM also makes use of what is called a "definitional identity." This is something that is automatically true, simply because of the way things have been defined.
- Chapter 2, Estimating Expected Return with the Theories of Modern Finance, p. 16
- When you buy a lottery ticket, you don't know how tickets have been sold. But sold they have been. And there is an underlying distribution for the game.
- Chapter 3, Estimating Portfolio Risk and Expected Return with Ad Hoc Factor Models, p. 29
- The cheaper the stock, the better the outlook for future returns.
- Chapter 4, Payoffs to the Five families, p. 50
- A comprehensive list of factors brings predictive stability and predictive stability and predictive power.
- Chapter 5, Predicting Future Stock Returns with the Expected-Return Factor Model, p. 56
- If we observe the performance of only those funds that remain active, we will tend to find that the average performance of the surviving funds exceeds that of the market.
- Chapter 6, Counterattack-The First Wave, p. 63 (See also: Survival bias)
- The cheapness family is the most powerful of the five.
- Chapter 10, The Positive Payoffs to Cheapness and Profitability, p. 105
- Less volatile stocks tend to have negative abnormal profits; more volatile stocks tend to have positive abnormal profits.
- Chapter 11, The Negative Payoff to Risk, p. 113
- Behaviorists tell us that we tend to overweight and overreact to the most recently received information. If we do, we will find that the information that we thought was so important becomes tempered, and reduced in significance, by new and related information that follows.
- Chapter 12, The Forces behind the Technical Payoffs to Price History, p. 121
- In real-world Finance, they don't pay for elegance. They pay for power - predictive power.
- Chapter 13, Counterattack - The Second Wave, p. 129
- In going directly to Investment Heaven, you build your portfolio as you would build a wonderful company through a merger and acquisition program. You specify the way you want your portfolio to look, and then you assemble the profile piece by piece by bringing together companies that make their own individual contributions to the desired character.
- Chapter 14, The Roads to Heaven and Hell, p. 139
- The New Finance focused on the market's major systematic mistake. In failing to appreciate the strength of competitive forces in a market economy, it over estimates the length of the short run. In doing so, it overreacts to records of success and failure for individual companies, driving the prices of successful firms too high and their unsuccessful counterparts too low.
- Chapter 15, The Wrong 20-yard Line, p. 142
- So you see, in the end, it is nearly certain that the power of prediction must triumph over the arrogance of elegance.
- Chapter 15, The Wrong 20-yard Line, p. 148