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|A Random Walk Down Wall Street, by Burton Malkeil. This trailblazing book has been so popular that it has almost as many editions as cats have lives. The term "random walk" describes the path shown on a time-based chart wherein each successive move upward or downward occurs by chance. When Malkeil first wrote this book in 1973, he used the random walk concept as a means of presenting the background of and basic argument for what is generally known as the Efficient Market Hypothesis--part of Modern Portfolio Theory (MPT). (Some critics pronounce this "empty.") Throughout this interesting and easy to read book, Malkeil covers a lot of useful ground, especially for readers who haven't read the academic rebuttals to the once-popular view that historical stock price patterns (charts) can predict future price movements. Interestingly, although Malkeil is commonly identified with MPT supporters, he identifies some inefficiencies in the stock market, even though MPT proponents believe that markets are so efficient that active, purposeful portfolio management makes little sense. For example, in earlier editions of this book, Malkeil pointed out the gross under-pricing of a number of closed-end stock funds, which sold far below their net asset values. To his credit, Malkeil also discusses the limitations and misuse of "beta" coefficients (a measure of investment volatility)--once the darlings of his fellow efficient market proponents. This clearly written book argues the case for efficient markets and provides a lot of worthwhile information. However, don't expect an explanation of how a supposedly efficient market could plunge over 20% in just one day, as U.S. stocks did in October of 1987, or how the NASDAQ index could soar to remarkable heights and then crash in a few short years. Good explanations of these unusual phenomena are best addressed by the rapidly growing field of behavioral finance.||
"...his message continues to resonate. Recommended for all investment collections."
"This edition looks at new wrinkles (it seems you can't beat the market by buying companies with '.com' in the name), and provides a lucid overview of novel investment vehicles."