Summary of Michael Mauboussin's More Than You Know , livre ebook

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31 pages

English

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Please note: This is a companion version & not the original book.
Sample Book Insights:
#1 The essays in this part of the book reveal the importance of investment philosophy. A good investment philosophy is like a good diet: it only works if it is sensible over the long haul and you stick with it.
#2 The goal of an investment process is to identify gaps between a company’s stock price and its expected value. The expected value is the weighted-average value for a distribution of possible outcomes.
#3 The only certainty is that there is no certainty. We must act despite uncertainty, and we must base our decisions on imperfect or incomplete information. But we must still make decisions based on an intelligent appraisal of available information.
#4 The process of making a decision should be judged not only on the outcome, but also on how it was made. A good process is one that carefully considers price against expected value. Investors can improve their process through quality feedback and ongoing learning.

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Publié par	Everest Media LLC
Date de parution	11 mai 2022
Nombre de lectures	0
EAN13	9798822505391
Langue	English
Poids de l'ouvrage	1 Mo

Informations légales : prix de location à la page 0,0150€. Cette information est donnée uniquement à titre indicatif conformément à la législation en vigueur.

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Insights on Michael J. Mauboussin's More Than You Know
Contents Insights from Chapter 1 Insights from Chapter 2 Insights from Chapter 3 Insights from Chapter 4
Insights from Chapter 1

#1

The essays in this part of the book reveal the importance of investment philosophy. A good investment philosophy is like a good diet: it only works if it is sensible over the long haul and you stick with it.

#2

The goal of an investment process is to identify gaps between a company’s stock price and its expected value. The expected value is the weighted-average value for a distribution of possible outcomes.

#3

The only certainty is that there is no certainty. We must act despite uncertainty, and we must base our decisions on imperfect or incomplete information. But we must still make decisions based on an intelligent appraisal of available information.

#4

The process of making a decision should be judged not only on the outcome, but also on how it was made. A good process is one that carefully considers price against expected value. Investors can improve their process through quality feedback and ongoing learning.

#5

The most widely used benchmark for equity fund performance is the SP 500. The SP Index Committee uses five main criteria when looking for index candidates: liquidity, fundamental analysis, market capitalization, sector representation, and lack of representation.

#6

The four attributes of the above-market performers are portfolio turnover, portfolio concentration, an intrinsic-value investment approach, and a focus on price-to-value discrepancies. They seem to follow the index’s strategy with regard to turnover and limited time on macro forecasting, and they deviate from the index’s strategy with regard to concentration and a sharp focus on price-to-value discrepancies.

#7

The investment profession is about managing portfolios to maximize long-term returns, while the investment business is about generating short-term earnings as an investment firm. There is nothing wrong with having a vibrant business, but a focus on the business at the expense of the profession is a problem.

#8

The optimal balance between the investment profession and the investment business should always favor the profession, because only in devotion to the disciplines of the profession can an organization have those shared values and cultures that attracts exceptionally talented individuals.

#9

The idea that an investor should be right more than wrong is pervasive and certainly has intuitive appeal. However, the magnitude of correctness is what matters, not the frequency of correctness.

#10

The behavioral fact that people are a lot happier when they are right frequently than when they are wrong explains why people are a lot happier when they are right than when they are wrong.

#11

The best performers in all probabilistic fields are able to look past frequencies and consider expected value. Investors, for example, tend to sell their winners too early and hold their losers too long, which is against the natural desire to be right.

#12

The expected value mindset is not limited to investing. It is applicable in many different contexts, from pari-mutuel betting to blackjack. It helps overcome the loss-aversion pitfall.

#13

The four principles of successful probabilistic thinking are focus, lots of situations, limited opportunities, and ante betting. In investing, you should not participate when the expected value is unattractive, but you can aggressively bet when a situation appears attractive.

#14

The reason why platitudes and fads in management come and go with such predictability is that they are not grounded in a robust categorization scheme. They are espoused as one-size-fits-all statements of cause and effect, and managers try them out because they sound good.

#15

The main message is that much of investment theory is unsound because it is based on poor categorization. We can say the same about much of management theory. A shift from attribute- to circumstance-based thinking can be of great help to investors and managers.

#16

The process of building theory is to describe what you want to understand in words and numbers, then to categorize the phenomena, and lastly to build a theory that explains the behavior of the phenomena.

#17

The central concepts in economics should be labeled as conSTRUCTS rather than theories because they cannot be directly falsified. They are still useful, but they cannot be proven right or wrong.

#18

The most important message from Christensen et al. is that proper categorization is essential to good theory. Theories that rest on circumstance-based categories tell practitioners what to do in different situations.

#19

The distinction between risk and uncertainty is important for investors to make because investing is fundamentally an exercise in probability. Every day, investors must translate investment opportunities into probabilities.

#20

The three ways to get to a probability are degrees of belief, propensities, and frequencies. The academic finance community mostly uses degrees of belief, with the resulting probabilities heavily colored by recent experience.

#21

The stock market is not a normal distribution, and stock price changes do not follow a normal distribution.

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