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On this site, see the article on portfolio theory.

This article serves as a natural introduction to index investing.

 



     This finance page has more on heights as an example of a normal distribution.

See this page for the non-normal ("fat tail" or platykurtic) nature of the market.

On incubator funds, see this speech by John Bogle, and this IFA article (it has a picture that will give you nightmares).

For even worse incubator fund nightmares, see this SEC account and related speech about one extreme case. (Note that it takes an extreme case before the SEC will take action: the "luck as skill" marketing trick isn't illegal.)

This paper by Geoffrey Friesen and Travis Sapp actually measures how badly investors lag the market by attempting to time it: 1.56% annually, on average. The inevitable conclusion: "our results commend the relative appeal of a simple 'buy and hold' strategy to the average investor."

This 1977 article by Warren Buffett explains why inflation is harmful to stock returns.

A 1979 Business Week article titled The Death of Equities describes the strange strategies investors were using to try to beat stagflation.

 

Also see the Recommended Books page.

     This article was mainly inspired by one excellent book, Fooled by Randomness.

In Misbehavior of Markets, Benoit Mandelbrot shows how the market is far from normal in the short run (although what do fractals have to do with it?)

The Cartoon Guide to Statistics is the easiest imaginable introduction to basic statistics concepts.

The Four Pillars of Investing describes the finance business and how they market luck as skill.

 

Article Contents
Market Abnormality
Significant Outliers
Ups and Downs
Long Term Risk
Momentum & Reversion
Crashes & Recoveries
Retirement Planning
MPT, VaR
Skill vs. Luck
Books & Links

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