When is alpha not really “alpha”? When it’s “beta-alpha.”
| May 12th, 2010 | Filed under: Academic Research, CAPM / Alpha Theory, Today's Post | By: Alpha Male |
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Put up your hand if you’ve heard some pundit tell you recently that “we’re now in a stock picker’s market”? The thrust is, many of those pundits seems to say the same thing year after year, don’t they?
In fairness, there is a good reason to say that a sideways market is a “stock-picker’s” market since you can’t rely on beta to produce returns. But the reality is that pundits forecast sideways or modestly trending markets more often then not. If they argued otherwise – that the stocks were going to rise or fall en masse – then why would you need the help of their market punditry? Besides, if markets are fairly valued at any given moment, it’s technically impossible to predict the market anyways – leaving no choice but to predict the safe bet: a sideways, stock-picker’s market. It’s almost as if they have an interest in the retail investor being scared into hiring professional stock-picker to navigate the markets… More…
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