Paradigms and delusions

Article Abstract:

A parallel of the Salem witchcraft trials of 1693 is made with current stock markets. Equity market returns in supposedly mature economies are considered over the past 20 years, and stability along with technological advance has provided developed economies with growth opportunities. The logic of the 'new paradigm' that businesses are more valuable than they have ever been as they are making and keeping more profits in an environmental unaffected by high inflation. This is expressed in the investors' enthusiasm for size, with the consequence that the FTSE 100 index rose 15% in 1998, but the SmallCap index fell 10%.

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Generating expected returns

Article Abstract:

Modern portfolio theory requires numerical predictions for returns, but conventional methods of choosing stocks rarely provide such predictions. A different approach is based on simple equations, relating future quarterly returns to a number of economic factors. The equation is demonstrated for Cable & Wireless as an example. The approach can be used together with other conventional approaches.

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The secret's out

Article Abstract:

There are certain shrewd investors whose moves are worth tracking as indicators of potentially rewarding investments. Research into their investment decisions is worthwhile.

Study and teaching, Investment analysis, Securities analysis

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