A Random Walk Down Wall Street: The Time-Tested Strategy for Successful Investing by Burton G. Malkiel

Author:Burton G. Malkiel [Malkiel, Burton G.]
Language: eng
Format: epub, mobi, pdf
Tags: Non-fiction, Business, Reference
ISBN: 9780393081435
Google: O8x1YpBp6WYC
Amazon: B004KKXMZQ
Barnesnoble: B004KKXMZQ
Goodreads: 9985538
Publisher: W.W. Norton & Co.
Published: 1973-01-01T00:00:00+00:00

RISK AND RETURN ACCORDING TO THE CAPITAL-ASSET PRICING MODEL*

ILLUSTRATION OF PORTFOLIO BUILDING*

Just as stocks had their fads, so beta came into high fashion in the early 1970s. Institutional Investor, the prestigious magazine that spent most of its pages chronicling the accomplishments of professional money managers, put its imprimatur on the movement by featuring on its cover the letter beta on top of a temple and including as its lead story “The Beta Cult! The New Way to Measure Risk.” The magazine noted that money men whose mathematics hardly went beyond long division were now “tossing betas around with the abandon of PhDs in statistical theory.” Even the SEC gave beta its approval as a risk measure in its Institutional Investors Study Report.

On Wall Street, the early beta fans boasted that they could earn higher long-run rates of return simply by buying a few high-beta stocks. Those who thought they were able to time the market thought they had an even better idea. They would buy high-beta stocks when they thought the market was going up, switching to low-beta ones when they feared the market might decline. To accommodate the enthusiasm for this new investment idea, beta measurement services proliferated among brokers, and it was a symbol of progressiveness for an investment house to provide its own beta estimates. Today, you can obtain beta estimates from brokers such as Merrill Lynch and investment advisory services such as Value Line and Morningstar. The beta boosters on the Street oversold their product with an abandon that would have shocked even the most enthusiastic academic scribblers intent on spreading the beta gospel.

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