Archive for May 4th, 2007

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May 4, 2007

1. A very good article on Investments by Hal Varian (He used to be my one of the favorite economist at one point of time). The summary is: “No point in timing the market, just buy and hold.”

An investor who bought a value-weighted portfolio of stocks in the New York Stock Exchange and American Stock Exchange in 1926 and held them until 2002 would have earned an average annual return of about 10 percent. By contrast, an individual who bought in 1926 but moved his dollars in and out of the market in the same pattern as the average dollar invested in the market would have earned a return of only 8.6 percent a year.

For Nasdaq, the difference between buy-and-hold and dollar-weighted returns is even larger. An investor who bought the Nasdaq index in 1973 and sold in 2002 would have earned an average yearly return of 9.6 percent. But the typical investor in Nasdaq earned only 4.3 percent over this period. This is true not just in the United States — the same thing occurred in 18 of 19 international markets that Mr. Dichev examined.

The article aslo provides with some useful recent research in capital markets.

2. I like blogs as it allows people like me to read up on what the top minds in my chosen subject of interest are thinking about. Most of them share their views openly and allow others to participate via comments.

I posted some days ago about the debate most economists (who are blogging that is) had on benefits of trade.

In carrying on with the discussion spirit, Marginal Revolution asks Rodrik a question to which latter replies. This is what blogging is all about.

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