From: Brian Atkins (brian@posthuman.com)
Date: Wed Jun 11 2003 - 12:40:34 MDT
Hal Finney wrote:
>
> These observations are based both on theory and practice. I studied
> some of the academic literature several years ago, and statistically
> they found virtually no correlation between past price changes and future
> price changes.
>
On the other hand, there have been statistical studies done that do show
that based on rather simple metrics like market P/E, a buy & hold
portfolio over a long term (10 years or more) holding period has
somewhat predictable performance. Based on historical data, it would be
predictable that investing at high P/Es (BTW, the markets are still at a
high P/E) greatly increases the odds your portfolio will experience a
long term no-growth or negative-growth performance from stocks.
Here's one example, there are others out there:
http://www.kc.frb.org/PUBLICAT/ECONREV/PDF/4q00shen.pdf
(It's also fun to note that this was written back in 2000 apparently,
and even then this economist was still "drinking the bubble kool-aid".
Heck, I even have a saved post by ultra-rational Robin Hanson from June
2000 where he also wasn't quite sure if we were in a bubble. Makes me
feel at least a bit less peeved with myself :-/)
Anyway, besides the P/E stuff, there also is some statistical evidence
for at least one set of market performance cycles... if you combine that
with what, as technology futurists, we expect to see in the coming
years, it is quite likely we are indeed in the deflationary bear market
chunk of the cycle, which very well may continue on for the next 10
years or so. Even during such parts of the cycle though, the market has
as many or more up years than down years, but don't expect any kind of
significant returns during this period from a LTB&H approach unless you
are holding securities that provide you a fixed rate of return.
-- Brian Atkins Singularity Institute for Artificial Intelligence http://www.singinst.org/
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