Investment Philosophies Successful Strategies and the Investors Who Made Them Work
Produktdetaljer
Biografisk notat
ASWATH DAMODARAN is a Professor of Finance at New York University’s Leonard N. Stern School of Business. He has received numerous awards for outstanding teaching, including the NYU university-wide Distinguished Teaching Award, was named one of the nation’s top business teachers by BusinessWeek in 1994, and teaches training courses in corporate finance and valuation at many leading investment banks.
Investment Philosophies Successful Strategies and the Investors Who Made Them Work
A comprehensive walkthrough of proven, practical approaches to investing and expert guidance on choosing the one that works in your situation
In the revised third edition of Investment Philosophies, Aswath Damodaran delivers a deep dive into a variety of investment philosophies, exploring the assumptions and beliefs that underlie each of them. You’ll explore the investment strategies that arise from each philosophy, as well as what you – as an investor – need to bring to the table to make the philosophy work in the real world. Rather than present one philosophy as the “one best” philosophy for all investors, the book presents a variety of choices, letting investors pick the one that best fits their personal beliefs about markets and personalities.
This book covers a range investing schools of thought, from charting and technical analysis, often given short shrift in academia and practice, to market timing, with different stands of value and growth investing, as well as information-based trading and arbitrage. You’ll discover:
- The tools you need to understand portfolio management and the different approaches to investing that can reasonably be expected to lead to success
- The evidence in the data backing or working against different investment strategies.
- A guide to creating and managing a portfolio in contemporary markets
- Techniques to help you manage your investment strategies, and improve your odds for success
In this new edition, explores alternative investing choices, from real estate, to gold, to cryptos, to venture capital and private equity the reason for their allure and growth, and the gaps between promise and performance.
An essential resource that explores the gamut of reputable and proven investing philosophies, Investment Philosophies provides you with helpful online resources, tools, in-depth guidance, and a comprehensive strategy guide for everyone interested in selecting a practical, effective approach to investing that works for them.
CHAPTER 1
Introduction 1
What Is an Investment Philosophy? 2
Why Do You Need an Investment Philosophy? 3
The Big Picture of Investing 4
Categorizing Investment Philosophies 7
Developing an Investment Philosophy 10
CHAPTER 2
Upside and Downside—Understanding Risk 15
What Is Risk? 16
Risk Aversion: Measurement and Consequences 16
Equity Risk: Theory-based Models 17
Assessing Conventional Risk-and-return Models 33
Equity Risk: Alternative Measures 35
Equity Risk: Assessing the Field 46
Default Risk 48
CHAPTER 3
Numbers Don't Lie—or Do They? 55
The Basic Accounting Statements 56
Asset Measurement and Valuation 56
Measuring Financing Mix 65
Measuring Earnings and Profitability 73
Measuring Risk 81
Differences in Accounting Standards and Practices 88
CHAPTER 4
Show Me the Money: The Basics of Valuation and Pricing 93
Intrinsic Value 94
Pricing or Relative Valuation 119
Valuing an Asset with Contingent Cash Flows (Options) 129
CHAPTER 5
Many a Slip: Trading, Execution, and Taxes 135
The Trading Cost Drag 135
The Components of Trading Costs: Traded Financial Assets 137
Trading Costs with Nontraded Assets 156
Management of Trading Costs 158
Taxes 161
CHAPTER 6
Too Good to Be True? Testing Investment Strategies 173
Why Does Market Efficiency Matter? 173
Efficient Markets: Definition and Implications 174
Behavioral Finance: The Challenge to Efficient Markets 181
A Skeptic's Guide to Investment Strategies 214
CHAPTER 7
Smoke and Mirrors? Price Patterns, Volume Charts, and Technical Analysis 219
Random Walks and Price Patterns 219
Empirical Evidence on Pricing Patterns 221
The Foundations of Technical Analysis 250
Technical Indicators and Charting Patterns 252
Social Media and Markets 265
Determinants of Success at Charting and Technical Analysis 269
CHAPTER 8
From Graham to Private Equity: Value Investing 273
Who Is a Value Investor? 273
The Passive Screener 275
The Contrarian Value Investor 304
Activist Value Investing 312
CHAPTER 9
The Allure of Growth: Small Cap and Growth Investing 337
Who Is a Growth Investor? 337
Proxy Growth Investing 338
Passive Growth Investing 358
Activist Growth Investing 379
CHAPTER 10
Information Pays: Trading on News 395
Information and Prices 396
Trading on Private Information 398
Trading on Public Information 418
Implementing an Information-based Investment Strategy 440
CHAPTER 11
A Sure Profit: The Essence of Arbitrage 445
The Essence of Arbitrage 445
Pure Arbitrage 447
Near Arbitrage 471
Speculative Arbitrage 485
Long/short Strategies—Hedge Funds 490
CHAPTER 12
The Impossible Dream? Timing the Market 499
Market Timing: Payoff and Costs 499
Market timing Approaches 503
The Evidence on Market Timing 533
Market-timing Strategies 542
Market-timing Instruments 546
Connecting Market Timing to Security Selection 549
CHAPTER 13
The Allure of Indexing 553
The Mechanics of Indexing 553
A History of Indexing 557
The Case for Indexing 560
Why Do Active Investors Not Perform Better? 584
Enhanced Index Funds 591
CHAPTER 14
Investing in Alternatives 603
The Alternative Investment Universe 603
The Sales Pitch for Alternatives 607
Price and Value with Alternative Investments 611
Real Estate: The Underfollowed Investment Class 613
Collectibles 620
The Rise of Alternative Investing 648
Alternative Investment Philosophies 655
CHAPTER 15
A Road Map to Choosing an Investment Philosophy 661
A Self-assessment 659
Finding an Investment Philosophy 665
The Right Investment Philosophy (Philosophies) 667
Conclusion 674
Exercises 675
Index 677
PRAISE FOR INVESTMENT PHILOSOPHIES
“Damodaran is a well-informed scholar with a gift for organized, clearly written syntheses of complex topics in modern finance. With Investment Philosophies he provides the uncensored facts about winning in the marketplace. If you are a fund manager, an investor, or simply a student of finance you will want to read this book.”
—Tom Copeland, CEO, Copeland Valuation Consultants
“Professor Damodaran has zeroed in on the most important missing element of many investment management processes: a clearly defined investment philosophy which can serve as a beacon in difficult markets. He offers a cornucopia of philosophies and strategies that have worked for many of the most successful investors, and which have stood the test of time.”
—Rob Arnott, Founder and Chairman, Research Affiliates, LLC
“As an investor, I always have to look back to my philosophy and strategy for taking risk and making money. This book is an invaluable aid for ‘taking stock’ before buying stock. It lays out the concepts and tools for understanding the basics of risk and return in the stock market, and presents a framework for any investor to construct his or her own investment philosophy.”
—Mitch Julis, Co-Founder, Co-Chairman, Co-CEO of Canyon Partners, LLC
MASTER PROVEN INVESTMENT STRATEGIES THAT HAVE CONSISTENTLY DELIVERED RESULTS ACROSS MARKET CYCLES
In the third edition of Investment Philosophies: Successful Strategies and the Investors Who Made Them Work, veteran investor and NYU finance professor Aswath Damodaran delivers an authoritative guide to understanding and implementing investment strategies that have stood the test of time. Few investors beat the market consistently, and this book reveals why successful investors use very different approaches and what makes each philosophy work.
This comprehensive resource examines indexing, passive and activist value investing, growth investing, technical analysis, market timing, arbitrage, and more. Each chapter explores the beliefs underlying a particular philosophy, presents evidence on whether strategies actually produce results, and identifies what you need to bring to the table to make it work. The book’s modular structure with enhanced online resources lets you drill down on the strategies most relevant to your investment goals.
Investment Philosophies is an essential resource for investors, portfolio managers, financial professionals, and anyone seeking to select a practical, effective approach to investing. Whether you’re a CFA practitioner, finance student, or serious individual investor, this book provides the framework and tools you need to assess which investment philosophy aligns with your skills and market circumstances.
The challenge facing every investor is choosing the right investment philosophy from among many competing approaches. In the third edition of Investment Philosophies: Successful Strategies and the Investors Who Made Them Work, Professor Aswath Damodaran addresses this fundamental problem by examining the diverse strategies that have enabled certain investors to consistently outperform the market. Drawing on his expertise as a distinguished teacher at NYU’s Stern School of Business and consultant to leading investment banks, Damodaran provides a comprehensive framework for understanding which philosophies work and why.
The book explores a wide range of proven investment approaches, from indexing strategies to passive and activist value investing, growth investing methodologies, and technical analysis techniques. Each philosophy is examined through three critical dimensions: the core beliefs that underlie it, empirical evidence on strategy effectiveness, and the personal qualities investors need to implement it successfully. Investment Philosophies profiles the famous investors who pioneered these approaches, revealing not just the mechanics but the mindset behind their success.
This edition features a more modular structure, making it easier for investors to focus on philosophies that match their interests and circumstances. Enhanced online resources and practical tools enable readers to thoroughly investigate each investment strategy and assess its fit with their capabilities. The book covers market timing, arbitrage opportunities, chart analysis, and many other approaches that collectively explain investor behavior in contemporary markets.
Investment Philosophies is essential reading for investors, portfolio managers, financial professionals, and CFA practitioners seeking to make informed decisions about their investment approach. This authoritative guide provides the knowledge and framework necessary to select and implement a philosophy that aligns with your skills, resources, and the current market environment.
A comprehensive walkthrough of proven, practical approaches to investing and expert guidance on choosing the one that works in your situation
In the revised third edition of Investment Philosophies, Aswath Damodaran delivers a deep dive into a variety of investment philosophies, exploring the assumptions and beliefs that underlie each of them. You’ll explore the investment strategies that arise from each philosophy, as well as what you – as an investor – need to bring to the table to make the philosophy work in the real world. Rather than present one philosophy as the “one best” philosophy for all investors, the book presents a variety of choices, letting investors pick the one that best fits their personal beliefs about markets and personalities.
This book covers a range investing schools of thought, from charting and technical analysis, often given short shrift in academia and practice, to market timing, with different stands of value and growth investing, as well as information-based trading and arbitrage. You’ll discover:
- The tools you need to understand portfolio management and the different approaches to investing that can reasonably be expected to lead to success
- The evidence in the data backing or working against different investment strategies.
- A guide to creating and managing a portfolio in contemporary markets
- Techniques to help you manage your investment strategies, and improve your odds for success
In this new edition, explores alternative investing choices, from real estate, to gold, to cryptos, to venture capital and private equity the reason for their allure and growth, and the gaps between promise and performance.
An essential resource that explores the gamut of reputable and proven investing philosophies, Investment Philosophies provides you with helpful online resources, tools, in-depth guidance, and a comprehensive strategy guide for everyone interested in selecting a practical, effective approach to investing that works for them.
CHAPTER 1
Introduction 1
What Is an Investment Philosophy? 2
Why Do You Need an Investment Philosophy? 3
The Big Picture of Investing 4
Categorizing Investment Philosophies 7
Developing an Investment Philosophy 10
CHAPTER 2
Upside and Downside—Understanding Risk 15
What Is Risk? 16
Risk Aversion: Measurement and Consequences 16
Equity Risk: Theory-based Models 17
Assessing Conventional Risk-and-return Models 33
Equity Risk: Alternative Measures 35
Equity Risk: Assessing the Field 46
Default Risk 48
CHAPTER 3
Numbers Don't Lie—or Do They? 55
The Basic Accounting Statements 56
Asset Measurement and Valuation 56
Measuring Financing Mix 65
Measuring Earnings and Profitability 73
Measuring Risk 81
Differences in Accounting Standards and Practices 88
CHAPTER 4
Show Me the Money: The Basics of Valuation and Pricing 93
Intrinsic Value 94
Pricing or Relative Valuation 119
Valuing an Asset with Contingent Cash Flows (Options) 129
CHAPTER 5
Many a Slip: Trading, Execution, and Taxes 135
The Trading Cost Drag 135
The Components of Trading Costs: Traded Financial Assets 137
Trading Costs with Nontraded Assets 156
Management of Trading Costs 158
Taxes 161
CHAPTER 6
Too Good to Be True? Testing Investment Strategies 173
Why Does Market Efficiency Matter? 173
Efficient Markets: Definition and Implications 174
Behavioral Finance: The Challenge to Efficient Markets 181
A Skeptic's Guide to Investment Strategies 214
CHAPTER 7
Smoke and Mirrors? Price Patterns, Volume Charts, and Technical Analysis 219
Random Walks and Price Patterns 219
Empirical Evidence on Pricing Patterns 221
The Foundations of Technical Analysis 250
Technical Indicators and Charting Patterns 252
Social Media and Markets 265
Determinants of Success at Charting and Technical Analysis 269
CHAPTER 8
From Graham to Private Equity: Value Investing 273
Who Is a Value Investor? 273
The Passive Screener 275
The Contrarian Value Investor 304
Activist Value Investing 312
CHAPTER 9
The Allure of Growth: Small Cap and Growth Investing 337
Who Is a Growth Investor? 337
Proxy Growth Investing 338
Passive Growth Investing 358
Activist Growth Investing 379
CHAPTER 10
Information Pays: Trading on News 395
Information and Prices 396
Trading on Private Information 398
Trading on Public Information 418
Implementing an Information-based Investment Strategy 440
CHAPTER 11
A Sure Profit: The Essence of Arbitrage 445
The Essence of Arbitrage 445
Pure Arbitrage 447
Near Arbitrage 471
Speculative Arbitrage 485
Long/short Strategies—Hedge Funds 490
CHAPTER 12
The Impossible Dream? Timing the Market 499
Market Timing: Payoff and Costs 499
Market timing Approaches 503
The Evidence on Market Timing 533
Market-timing Strategies 542
Market-timing Instruments 546
Connecting Market Timing to Security Selection 549
CHAPTER 13
The Allure of Indexing 553
The Mechanics of Indexing 553
A History of Indexing 557
The Case for Indexing 560
Why Do Active Investors Not Perform Better? 584
Enhanced Index Funds 591
CHAPTER 14
Investing in Alternatives 603
The Alternative Investment Universe 603
The Sales Pitch for Alternatives 607
Price and Value with Alternative Investments 611
Real Estate: The Underfollowed Investment Class 613
Collectibles 620
The Rise of Alternative Investing 648
Alternative Investment Philosophies 655
CHAPTER 15
A Road Map to Choosing an Investment Philosophy 661
A Self-assessment 659
Finding an Investment Philosophy 665
The Right Investment Philosophy (Philosophies) 667
Conclusion 674
Exercises 675
Index 677
PRAISE FOR INVESTMENT PHILOSOPHIES
“Damodaran is a well-informed scholar with a gift for organized, clearly written syntheses of complex topics in modern finance. With Investment Philosophies he provides the uncensored facts about winning in the marketplace. If you are a fund manager, an investor, or simply a student of finance you will want to read this book.”
—Tom Copeland, CEO, Copeland Valuation Consultants
“Professor Damodaran has zeroed in on the most important missing element of many investment management processes: a clearly defined investment philosophy which can serve as a beacon in difficult markets. He offers a cornucopia of philosophies and strategies that have worked for many of the most successful investors, and which have stood the test of time.”
—Rob Arnott, Founder and Chairman, Research Affiliates, LLC
“As an investor, I always have to look back to my philosophy and strategy for taking risk and making money. This book is an invaluable aid for ‘taking stock’ before buying stock. It lays out the concepts and tools for understanding the basics of risk and return in the stock market, and presents a framework for any investor to construct his or her own investment philosophy.”
—Mitch Julis, Co-Founder, Co-Chairman, Co-CEO of Canyon Partners, LLC
MASTER PROVEN INVESTMENT STRATEGIES THAT HAVE CONSISTENTLY DELIVERED RESULTS ACROSS MARKET CYCLES
In the third edition of Investment Philosophies: Successful Strategies and the Investors Who Made Them Work, veteran investor and NYU finance professor Aswath Damodaran delivers an authoritative guide to understanding and implementing investment strategies that have stood the test of time. Few investors beat the market consistently, and this book reveals why successful investors use very different approaches and what makes each philosophy work.
This comprehensive resource examines indexing, passive and activist value investing, growth investing, technical analysis, market timing, arbitrage, and more. Each chapter explores the beliefs underlying a particular philosophy, presents evidence on whether strategies actually produce results, and identifies what you need to bring to the table to make it work. The book’s modular structure with enhanced online resources lets you drill down on the strategies most relevant to your investment goals.
Investment Philosophies is an essential resource for investors, portfolio managers, financial professionals, and anyone seeking to select a practical, effective approach to investing. Whether you’re a CFA practitioner, finance student, or serious individual investor, this book provides the framework and tools you need to assess which investment philosophy aligns with your skills and market circumstances.
The challenge facing every investor is choosing the right investment philosophy from among many competing approaches. In the third edition of Investment Philosophies: Successful Strategies and the Investors Who Made Them Work, Professor Aswath Damodaran addresses this fundamental problem by examining the diverse strategies that have enabled certain investors to consistently outperform the market. Drawing on his expertise as a distinguished teacher at NYU’s Stern School of Business and consultant to leading investment banks, Damodaran provides a comprehensive framework for understanding which philosophies work and why.
The book explores a wide range of proven investment approaches, from indexing strategies to passive and activist value investing, growth investing methodologies, and technical analysis techniques. Each philosophy is examined through three critical dimensions: the core beliefs that underlie it, empirical evidence on strategy effectiveness, and the personal qualities investors need to implement it successfully. Investment Philosophies profiles the famous investors who pioneered these approaches, revealing not just the mechanics but the mindset behind their success.
This edition features a more modular structure, making it easier for investors to focus on philosophies that match their interests and circumstances. Enhanced online resources and practical tools enable readers to thoroughly investigate each investment strategy and assess its fit with their capabilities. The book covers market timing, arbitrage opportunities, chart analysis, and many other approaches that collectively explain investor behavior in contemporary markets.
Investment Philosophies is essential reading for investors, portfolio managers, financial professionals, and CFA practitioners seeking to make informed decisions about their investment approach. This authoritative guide provides the knowledge and framework necessary to select and implement a philosophy that aligns with your skills, resources, and the current market environment.
Produktdetaljer
Biografisk notat
ASWATH DAMODARAN is a Professor of Finance at New York University’s Leonard N. Stern School of Business. He has received numerous awards for outstanding teaching, including the NYU university-wide Distinguished Teaching Award, was named one of the nation’s top business teachers by BusinessWeek in 1994, and teaches training courses in corporate finance and valuation at many leading investment banks.