What Works on Wall Street: A Guide to the Best-Performing Investment Strategies of All Time - Hardcover

James P. O'Shaughnessy (Author)

Hardcover

ISBN 10: 0070479852 ISBN 13: 9780070479852

Publisher: Mcgraw-Hill, 1996

Synopsis

Now, for the first time, investors can cut through the hype and see for themselves what works and what doesn't on Wall Street. James O'Shaughnessy, author of the highly-acclaimed Invest Like the Best, analyzes 30 years worth of CompuStat stock market data to show how the 15 most popular investment strategies have actually performed over time. With What Works on Wall Street, investors of all stripes-from the most conservative to the most aggressive-will finally have the facts to pick the best strategies for meeting their investment objectives.

About this title

Review

Investors -- be they aggressive or conservative, self-directed or professionally managed -- are always on the lookout for an edge. And in James O'Shaughnessy's What Works on Wall Street: A Guide to the Best-Performing Investment Strategies of All Time, they'll find a solid one: authoritative analysis of popular practices from the past. The author examines three decades of stock market data to show how 15 of the most common investment tactics have fared over time.

From the Author

What Works on Wall Street was probably the most anticipated investment book of 1996. James O'Shaughnessy gained unprecedented access to Standard & Poor's Compustat database and back-tested the returns generated by various clearly defined investment approaches over the past 40 years. The book challenges quite a bit of the conventional wisdom about portfolio management and is a compelling, although statistically flawed, work.

In What Works on Wall Street, O'Shaughnessy examines the performance of the highest and lowest price/earnings, price/sales, price/book value, relative strength, yield and earnings growth stocks over various periods, trying to find which types of companies tended to perform best. Although you can quibble with a lot of the data, the sheer magnitude of the task O'Shaughnessy has undertaken is impressive. His final, multifactor strategies that generated the best investments over time are very interesting, particularly the Cornerstone Value approach, which is very similar to the Dow Dividend Approach with a few other bells and whistles.

O'Shaughnessy's book and its findings should be read, discussed and disputed by all investors. However much one can criticize the work for being too focused on the plight of professional money managers looking to pick fifty stocks and not individual investors looking to pick five, the information is valuable and compelling. The only warning that I would give to readers is to be aware of a methodological error in the way O'Shaughnessy does the statistics. Because of the time required, O'Shaughnessy and his team looked at how the 50 highest or lowest stocks in any particular group performed. Extrapolating the performance of extreme data points to the entire set of data being studied is not entirely correct, as there are many processes in nature where the middle actually does not act like the extremes. Mass and velocity in physics are one example, where super-light and super-dense objects both do not obey the laws of physics, while everything in between does. With this caveat, I think an investor can learn a lot from the book.

Edition details

• Publisher: Mcgraw-Hill
• Publication date: 1996
• ISBN 10: 0070479852
• ISBN 13: 9780070479852
• Binding: Hardcover
• Language: English
• Edition number: 1
• Number of pages: 352