A Random Walk Down Wall Street

Burton Gordon Malkiel, a Princeton University economist, wrote A Random Walk Down Wall Street, a book about stock markets that popularized the random walk hypothesis. Malkiel claims that asset prices resemble a random walk and that it is impossible to consistently outperform market averages. Those who support the efficient-market hypothesis usually quote this work.

In light of scholarly research investigations of these methods, Malkiel analyses various popular investment strategies, such as technical analysis and fundamental analysis. He finds severe problems in both tactics after a thorough examination, finding that implementing these methods will provide inferior results for most investors when compared to passive strategies.

Malkiel criticizes approaches for picking actively managed mutual funds based on historical performance, similarly. He cites research that shows actively managed mutual funds have a wide range of long-term success rates, typically underperforming in the years following their achievements and therefore regressing to the mean. According to Malkiel, given the distribution of fund performance, an average investor is statistically unlikely to choose those few mutual funds that will outperform their benchmark index over the long term.

This book, now in its ninth edition, is an excellent introductory read for anyone starting a portfolio. Indexing, diversification, trends, bubbles, the significance of patience and time, and a slew of other key themes are all prominent inside. There have been twelve versions and more than 1.5 million copies sold as of 2020.

Author: Burton Gordon Malkie

Link to buy: https://www.amazon.com/Random-Walk-Down-Wall-Street/dp/0393330338