Noisy Market Hypothesis Jeremy Siegel

This new paradigm claims that the prices of securities are not always the best estimate of the true underlying value of the firm. It argues that prices can be influenced by speculators and momentum traders, as well as by insiders and institutions that often buy and sell stocks for reasons unrelated to fundamental value, such as for diversification, liquidity and taxes. In other words, prices of securities are subject to temporary shocks that I call "noise" that obscures their true value. These temporary shocks may last for days or for years, and their unpredictability makes it difficult to design a trading strategy that consistently produces superior returns. To distinguish this paradigm from the reigning efficient market hypothesis, I call it the "noisy market hypothesis."
---
The noisy market hypothesis easily explains the size and value anomalies. If a stock price falls for reasons unrelated to the changes in the fundamental value, then it is likely -- but not certain -- that overweighting such a stock will yield better than normal returns. On the other hand, stocks that rise in price more than their fundamentals become "large stocks" with high P/E ratios that are likely to underperform.
These discrepancies are not easy to arbitrage away on a stock-by-stock basis. The noisy market hypothesis does not say that every stock that changes price does so by more than what is justified by fundamentals. Any particular stock may still be undervalued when it moves up in price or overvalued when it moves down.

Source:
The `Noisy Market' Hypothesis By Jeremy J. Siegel, Wall Street Journal, 14 June 2006

Downloaded from:
http://www.jeremysiegel.com/index.cfm/fuseAction/Resources.ListResources/type/article.cfm

Mixed-Gender Fund Management Teams

Mint reported this research in page 13 of 15th October 2007

In the paper titled "The Impact of Work Group Diversity on Performance: Large Sample Evidence from the Mutual Fund Industry" authors Stefan Ruenzi, Michaela Baer, and Alexandra Niessen came to the conclusion that mixed gender fund management teams are underperforming single fund managers, and single gender fund management teams. The study covered the period from January 1996 to the end of 2003 and average of 300 funds per year.

The think the relative poor performance can be traced in large part to the poorer communication that often exists in mixed teams.

The Mint's reporter discussed the research results with woman fund managers of india Swatim Kulkarni and Gautami Desai of UTI MF and Jyoti Vaswani of Aviva Life Insurance. They are not agreeing to the views expressed in the study

Objective of Blog

To record the summaries of research papers and projects in the area of Security Analysis and Portfolio Management and to examine their relevance for immediate practice.