{"product_id":"market-sense-and-nonsense-isbn-9781118494561","title":"Market Sense and Nonsense","description":"\u003cp\u003e\u003cb\u003eBestselling author, Jack Schwager, challenges the assumptions at the core of investment theory and practice and exposes common investor mistakes, missteps, myths, and misreads\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003eWhen it comes to investment models and theories of how markets work, convenience usually trumps reality. The simple fact is that many revered investment theories and market models are flatly wrong—that is, if we insist that they work in the real world. Unfounded assumptions, erroneous theories, unrealistic models, cognitive biases, emotional foibles, and unsubstantiated beliefs all combine to lead investors astray—professionals as well as novices. In this engaging new book, Jack Schwager, bestselling author of \u003ci\u003eMarket Wizards\u003c\/i\u003e and \u003ci\u003eThe New Market Wizards\u003c\/i\u003e, takes aim at the most perniciously pervasive academic precepts, money management canards, market myths and investor errors. Like so many ducks in a shooting gallery, Schwager picks them off, one at a time, revealing the truth about many of the fallacious assumptions, theories, and beliefs at the core of investment theory and practice.\u003c\/p\u003e \u003cul\u003e \u003cli\u003eA compilation of the most insidious, fundamental investment errors the author has observed over his long and distinguished career in the markets\u003c\/li\u003e \u003cli\u003eBrings to light the fallacies underlying many widely held academic precepts, professional money management methodologies, and investment behaviors\u003c\/li\u003e \u003cli\u003eA sobering dose of real-world insight for investment professionals and a highly readable source of information and guidance for general readers interested in investment, trading, and finance\u003c\/li\u003e \u003cli\u003eSpans both traditional and alternative investment classes, covering both basic and advanced topics\u003c\/li\u003e \u003cli\u003eAs in his best-selling \u003ci\u003eMarket Wizard\u003c\/i\u003e series, Schwager manages the trick of covering material that is pertinent to professionals, yet writing in a style that is clear and accessible to the layman\u003c\/li\u003e \u003c\/ul\u003e \u003cp\u003e \u003c\/p\u003e \u003cp\u003e \u003c\/p\u003e \u003cp\u003eForeword xv\u003c\/p\u003e \u003cp\u003ePrologue xvii\u003c\/p\u003e \u003cp\u003e\u003cb\u003ePart One Markets, Return, and Risk\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003e\u003cb\u003eChapter 1 Expert Advice 3\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003eComedy Central versus CNBC 3\u003c\/p\u003e \u003cp\u003eThe Elves Index 6\u003c\/p\u003e \u003cp\u003ePaid Advice 8\u003c\/p\u003e \u003cp\u003eInvestment Insights 11\u003c\/p\u003e \u003cp\u003e\u003cb\u003eChapter 2 The Deficient Market Hypothesis 13\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003eThe Efficient Market Hypothesis and Empirical Evidence 14\u003c\/p\u003e \u003cp\u003eThe Price is Not Always Right 15\u003c\/p\u003e \u003cp\u003eThe Market is Collapsing; Where is the News? 24\u003c\/p\u003e \u003cp\u003eThe Disconnect between Fundamental Developments and Price Moves 27\u003c\/p\u003e \u003cp\u003ePrice Moves Determine Financial News 37\u003c\/p\u003e \u003cp\u003eIs It Luck or Skill? Exhibit A: The Renaissance Medallion Track Record 39\u003c\/p\u003e \u003cp\u003eThe Flawed Premise of the Efficient Market Hypothesis: A Chess Analogy 40\u003c\/p\u003e \u003cp\u003eSome Players are Not Even Trying to Win 42\u003c\/p\u003e \u003cp\u003eThe Missing Ingredient 44\u003c\/p\u003e \u003cp\u003eRight for the Wrong Reason: Why Markets are Difficult to Beat 47\u003c\/p\u003e \u003cp\u003eDiagnosing the Flaws of the Efficient Market Hypothesis 49\u003c\/p\u003e \u003cp\u003eWhy the Efficient Market Hypothesis is Destined for the Dustbin of Economic Theory 50\u003c\/p\u003e \u003cp\u003eInvestment Insights 52\u003c\/p\u003e \u003cp\u003e\u003cb\u003eChapter 3 The Tyranny of Past Returns 55\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003eS\u0026amp;P Performance in Years Following High- and Low-Return Periods 57\u003c\/p\u003e \u003cp\u003eImplications of High- and Low-Return Periods on Longer-Term Investment Horizons 59\u003c\/p\u003e \u003cp\u003eIs There a Benefit in Selecting the Best Sector? 63\u003c\/p\u003e \u003cp\u003eHedge Funds: Relative Performance of the Past Highest-Return Strategy 70\u003c\/p\u003e \u003cp\u003eWhy Do Past High-Return Sectors and Strategy Styles Perform So Poorly? 77\u003c\/p\u003e \u003cp\u003eWait a Minute. Do We Mean to Imply . . . ? 78\u003c\/p\u003e \u003cp\u003eInvestment Insights 85\u003c\/p\u003e \u003cp\u003e\u003cb\u003eChapter 4 The Mismeasurement of Risk 87\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003eWorse Than Nothing 87\u003c\/p\u003e \u003cp\u003eVolatility as a Risk Measure 88\u003c\/p\u003e \u003cp\u003eThe Source of the Problem 92\u003c\/p\u003e \u003cp\u003eHidden Risk 95\u003c\/p\u003e \u003cp\u003eEvaluating Hidden Risk 100\u003c\/p\u003e \u003cp\u003eThe Confusion between Volatility and Risk 103\u003c\/p\u003e \u003cp\u003eThe Problem with Value at Risk (VaR) 105\u003c\/p\u003e \u003cp\u003eAsset Risk: Why Appearances May Be Deceiving, or Price Matters 107\u003c\/p\u003e \u003cp\u003eInvestment Insights 109\u003c\/p\u003e \u003cp\u003e\u003cb\u003eChapter 5 Why Volatility is Not Just about Risk, and the Case of Leveraged ETFs 111\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003eLeveraged ETFs: What You Get May Not Be What You Expect 112\u003c\/p\u003e \u003cp\u003eInvestment Insights 121\u003c\/p\u003e \u003cp\u003e\u003cb\u003eChapter 6 Track Record Pitfalls 123\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003eHidden Risk 123\u003c\/p\u003e \u003cp\u003eThe Data Relevance Pitfall 124\u003c\/p\u003e \u003cp\u003eWhen Good Past Performance is Bad 126\u003c\/p\u003e \u003cp\u003eThe Apples-and-Oranges Pitfall 128\u003c\/p\u003e \u003cp\u003eLonger Track Records Could Be Less Relevant 129\u003c\/p\u003e \u003cp\u003eInvestment Insights 132\u003c\/p\u003e \u003cp\u003e\u003cb\u003eChapter 7 Sense and Nonsense about Pro Forma Statistics 133\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003eInvestment Insights 136\u003c\/p\u003e \u003cp\u003e\u003cb\u003eChapter 8 How to Evaluate Past Performance 137\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003eWhy Return Alone is Meaningless 137\u003c\/p\u003e \u003cp\u003eRisk-Adjusted Return Measures 142\u003c\/p\u003e \u003cp\u003eVisual Performance Evaluation 156\u003c\/p\u003e \u003cp\u003eInvestment Insights 166\u003c\/p\u003e \u003cp\u003e\u003cb\u003eChapter 9 Correlation: Facts and Fallacies 169\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003eCorrelation Defined 169\u003c\/p\u003e \u003cp\u003eCorrelation Shows Linear Relationships 170\u003c\/p\u003e \u003cp\u003eThe Coefficient of Determination (\u003ci\u003er\u003c\/i\u003e\u003csup\u003e2\u003c\/sup\u003e) 171\u003c\/p\u003e \u003cp\u003eSpurious (Nonsense) Correlations 171\u003c\/p\u003e \u003cp\u003eMisconceptions about Correlation 173\u003c\/p\u003e \u003cp\u003eFocusing on the Down Months 176\u003c\/p\u003e \u003cp\u003eCorrelation versus Beta 179\u003c\/p\u003e \u003cp\u003eInvestment Insights 182\u003c\/p\u003e \u003cp\u003e\u003cb\u003ePart Two Hedge Funds as an Investment\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003e\u003cb\u003eChapter 10 The Origin of Hedge Funds 185\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003e\u003cb\u003eChapter 11 Hedge Funds 101 195\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003eDifferences between Hedge Funds and Mutual Funds 196\u003c\/p\u003e \u003cp\u003eTypes of Hedge Funds 200\u003c\/p\u003e \u003cp\u003eCorrelation with Equities 210\u003c\/p\u003e \u003cp\u003e\u003cb\u003eChapter 12 Hedge Fund Investing: Perception and Reality 211\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003eThe Rationale for Hedge Fund Investment 213\u003c\/p\u003e \u003cp\u003eAdvantages of Incorporating Hedge Funds in a Portfolio 214\u003c\/p\u003e \u003cp\u003eThe Special Case of Managed Futures 215\u003c\/p\u003e \u003cp\u003eSingle-Fund Risk 217\u003c\/p\u003e \u003cp\u003eInvestment Insights 220\u003c\/p\u003e \u003cp\u003e\u003cb\u003eChapter 13 Fear of Hedge Funds: It’s Only Human 223\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003eA Parable 223\u003c\/p\u003e \u003cp\u003eFear of Hedge Funds 225\u003c\/p\u003e \u003cp\u003e\u003cb\u003eChapter 14 The Paradox of Hedge Fund of Funds Underperformance 231\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003eInvestment Insights 236\u003c\/p\u003e \u003cp\u003e\u003cb\u003eChapter 15 The Leverage Fallacy 239\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003eThe Folly of Arbitrary Investment Rules 241\u003c\/p\u003e \u003cp\u003eLeverage and Investor Preference 242\u003c\/p\u003e \u003cp\u003eWhen Leverage is Dangerous 243\u003c\/p\u003e \u003cp\u003eInvestment Insights 245\u003c\/p\u003e \u003cp\u003e\u003cb\u003eChapter 16 Managed Accounts: An Investor-Friendly Alternative to Funds 247\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003eThe Essential Difference between Managed Accounts and Funds 248\u003c\/p\u003e \u003cp\u003eThe Major Advantages of a Managed Account 249\u003c\/p\u003e \u003cp\u003eIndividual Managed Accounts versus Indirect Managed Account Investment 250\u003c\/p\u003e \u003cp\u003eWhy Would Managers Agree to Managed Accounts? 251\u003c\/p\u003e \u003cp\u003eAre There Strategies That are Not Amenable to Managed Accounts? 253\u003c\/p\u003e \u003cp\u003eEvaluating Four Common Objections to Managed Accounts 253\u003c\/p\u003e \u003cp\u003eInvestment Insights 259\u003c\/p\u003e \u003cp\u003ePostscript to Part Two: Are Hedge Fund Returns a Mirage? 261\u003c\/p\u003e \u003cp\u003e\u003cb\u003ePart Three Portfolio Matters\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003e\u003cb\u003eChapter 17 Diversification: Why 10 is Not Enough 267\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003eThe Benefits of Diversification 267\u003c\/p\u003e \u003cp\u003eDiversification: How Much is Enough? 268\u003c\/p\u003e \u003cp\u003eRandomness Risk 269\u003c\/p\u003e \u003cp\u003eIdiosyncratic Risk 272\u003c\/p\u003e \u003cp\u003eA Qualification 273\u003c\/p\u003e \u003cp\u003eInvestment Insights 274\u003c\/p\u003e \u003cp\u003e\u003cb\u003eChapter 18 Diversification: When More is Less 277\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003eInvestment Insights 281\u003c\/p\u003e \u003cp\u003e\u003cb\u003eChapter 19 Robin Hood Investing 283\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003eA New Test 286\u003c\/p\u003e \u003cp\u003eWhy Rebalancing Works 290\u003c\/p\u003e \u003cp\u003eA Clarification 291\u003c\/p\u003e \u003cp\u003eInvestment Insights 292\u003c\/p\u003e \u003cp\u003e\u003cb\u003eChapter 20 Is High Volatility Always Bad? 295\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003eInvestment Insights 299\u003c\/p\u003e \u003cp\u003e\u003cb\u003eChapter 21 Portfolio Construction Principles 301\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003eThe Problem with Portfolio Optimization 301\u003c\/p\u003e \u003cp\u003eEight Principles of Portfolio Construction 305\u003c\/p\u003e \u003cp\u003eCorrelation Matrix 309\u003c\/p\u003e \u003cp\u003eGoing Beyond Correlation 310\u003c\/p\u003e \u003cp\u003eInvestment Insights 314\u003c\/p\u003e \u003cp\u003eEpilogue 32 Investment Observations 315\u003c\/p\u003e \u003cp\u003e\u003cb\u003eAppendix A Options—Understanding the Basics 319\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003e\u003cb\u003eAppendix B Formulas for Risk-Adjusted Return Measures 323\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003eSharpe Ratio 323\u003c\/p\u003e \u003cp\u003eSortino Ratio 324\u003c\/p\u003e \u003cp\u003eSymmetric Downside-Risk Sharpe Ratio 325\u003c\/p\u003e \u003cp\u003eGain-to-Pain Ratio (GPR) 326\u003c\/p\u003e \u003cp\u003eTail Ratio 326\u003c\/p\u003e \u003cp\u003eMAR and Calmar Ratios 326\u003c\/p\u003e \u003cp\u003eReturn Retracement Ratio 327\u003c\/p\u003e \u003cp\u003eAcknowledgments 329\u003c\/p\u003e \u003cp\u003eAbout the Author 331\u003c\/p\u003e \u003cp\u003eIndex 333\u003c\/p\u003e  \u003cp\u003e\"Full of common sense.\" (\u003cem\u003ePensions World,\u003c\/em\u003e February 2013) \u003c\/p\u003e\u003cp\u003e\"... Mr Schwager's book starts off with plenty of sound, basic advice... before expertly demonstrating that a leveraged exchange traded fund is a dreadful investment because of its structure, being almost bound to disappoint.\" (\u003cem\u003eThe Economist,\u003c\/em\u003e January 2013) \u003c\/p\u003e\u003cp\u003e\"Everybody, and I mean everybody who has an investment portfolio will profit from reading this book... kudos to the author for offering the investing world an uncommonly worthwhile book.\" (forexpros.com, 12th November 2012)   \u003c\/p\u003e\u003cp\u003e\u003cb\u003eJACK D. SCHWAGER\u003c\/b\u003e is a recognized industry expert on futures and hedge funds and the author of the widely acclaimed \u003ci\u003eMarket Wizards\u003c\/i\u003e and \u003ci\u003eSchwager on Futures\u003c\/i\u003e book series. He is currently the co-portfolio manager for the ADM Investor Services Diversified Strategies Fund, a portfolio of futures and FX managed accounts. He is also an advisor to Marketopper, an India-based quantitative trading firm. Previously, Mr. Schwager was a partner in the Fortune Group, a London-based hedge fund advisory firm, which specialized in creating customized hedge fund portfolios for institutional clients, and also spent over twenty years as a director of futures research for some of Wall Street's leading firms.   \u003c\/p\u003e\u003cp\u003eWhen it comes to investment models and theories of how markets work, convenience usually trumps reality. The simple fact is that many revered investment theories and market models are flatly wrong—that is, if we insist that they work in the real world. Unfounded assumptions, erroneous theories, unrealistic models, cognitive biases, emotional foibles, and unsubstantiated beliefs all combine to lead investors astray—professionals as well as novices.\u003c\/p\u003e In this engaging new book, Jack Schwager, bestselling author of the \u003ci\u003eMarket Wizards\u003c\/i\u003e series, takes aim at some of the most pervasive market precepts, money management misconceptions, and irrational investor behaviors. From the theory of efficient markets to buying in up markets and selling in down markets, Schwager turns each misguided idea on its head, one at a time. Supported by a wealth of well-documented historical evidence and a healthy dose of common sense, he exposes the truth about the cherished assumptions and fallacious thinking at the core of some of the most respected investment theories and models and explores many common investor errors. In this book, you'll discover why:  \u003cul\u003e \u003cli\u003eExpert opinion is NOT more reliable than the proverbial dart-throwing chimp\u003c\/li\u003e \u003cli\u003eThe markets are NOT efficient\u003c\/li\u003e \u003cli\u003eLow volatility does NOT necessarily imply low risk, and high volatility does NOT necessarily imply high risk\u003c\/li\u003e \u003cli\u003eMarket prices are NOT normally distributed\u003c\/li\u003e \u003cli\u003eInvesting in equities when markets are doing well is NOT conducive to achieving above-average returns\u003c\/li\u003e \u003cli\u003eConcentrating on funds with the strongest record of returns is NOT a sound strategy\u003c\/li\u003e \u003cli\u003ePast returns are NOT a reliable indicator of future performance\u003c\/li\u003e \u003cli\u003eA hedge fund portfolio strategy is NOT riskier than a traditional portfolio approach\u003c\/li\u003e \u003cli\u003eVaR does NOT provide a good indication of worst-case risk\u003c\/li\u003e \u003cli\u003eSuperior performance does NOT necessarily imply manager skill\u003c\/li\u003e \u003c\/ul\u003e \u003cp\u003eBut Schwager does much more than simply burst bubbles; he offers a sobering draught of real-world investment insight and guidance spanning both traditional and alternative investment classes. Drawing upon his years as an asset manager and trader, he shares priceless lessons on an array of investing topics, both basic and advanced, including portfolio management, risk assessment, investment selection, hedge fund investing, investment timing, and much more.\u003c\/p\u003e \u003cp\u003e\u003ci\u003eMarket Sense and Nonsense\u003c\/i\u003e is an indispensable source of real-world market wisdom and investing know-how for investors of every ilk.\u003c\/p\u003e  \u003cp\u003e\u003cb\u003eMARKET SENSE AND NONSENSE\u003c\/b\u003e \u003c\/p\u003e\u003cp\u003eWhen it comes to investment models and theories of how markets work, convenience usually trumps reality. The simple fact is that many revered investment theories and market models are flatly wrong—that is, if we insist that they work in the real world. Unfounded assumptions, erroneous theories, unrealistic models, cognitive biases, emotional foibles, and unsubstantiated beliefs all combine to lead investors astray—pro- fessionals as well as novices. \u003c\/p\u003e\u003cp\u003eIn this engaging new book, Jack Schwager, bestselling author of the \u003ci\u003eMarket Wizards\u003c\/i\u003e series, takes aim at some of the most pervasive market precepts, money management misconceptions, and irrational investor behav- iors. From the theory of efficient markets to buying in up markets and selling in down markets, Schwager turns each misguided idea on its head, one at a time. Supported by a wealth of well-documented historical evidence and a healthy dose of common sense, he exposes the truth about the cherished assumptions and fallacious thinking at the core of some of the most respected investment theories and models and explores many common investor errors. In this book, you'll discover why: \u003c\/p\u003e\u003cul\u003e \u003cli\u003eExpert opinion is NOT more reliable than the proverbial dart-throwing chimp\u003c\/li\u003e \u003cli\u003eThe markets are NOT efficient\u003c\/li\u003e \u003cli\u003eLow volatility does NOT necessarily imply low risk, and high volatility does NOT necessarily imply high risk\u003c\/li\u003e \u003cli\u003eMarket prices are NOT normally distributed\u003c\/li\u003e \u003cli\u003eInvesting in equities when markets are doing well is NOT conducive to achieving above-average returns\u003c\/li\u003e \u003cli\u003eConcentrating on funds with the strongest record of returns is NOT a sound strategy\u003c\/li\u003e \u003cli\u003ePast returns are NOT a reliable indicator of future performance\u003c\/li\u003e \u003cli\u003eA hedge fund portfolio strategy is NOT riskier than a traditional portfolio approach\u003c\/li\u003e \u003cli\u003eVaR does NOT provide a good indication of worst-case risk\u003c\/li\u003e \u003cli\u003eSuperior performance does NOT necessarily imply manager skill\u003c\/li\u003e \u003c\/ul\u003e \u003cp\u003eBut Schwager does much more than simply burst bubbles; he offers a sobering draught of real-world invest- ment insight and guidance spanning both traditional and alternative investment classes. Drawing upon his years as an asset manager and trader, he shares priceless lessons on an array of investing topics, both basic and advanced, including portfolio management, risk assessment, investment selection, hedge fund investing, investment timing, and much more. \u003c\/p\u003e\u003cp\u003e\u003ci\u003eMarket Sense and Nonsense\u003c\/i\u003e is an indispensable source of real-world market wisdom and investing know-how for investors of every ilk.\u003c\/p\u003e","brand":"Wiley","offers":[{"title":"Default Title","offer_id":47989574435045,"sku":"NP9781118494561","price":42.0,"currency_code":"USD","in_stock":false}],"thumbnail_url":"\/\/cdn.shopify.com\/s\/files\/1\/1842\/7735\/files\/9781118494561.jpg?v=1761784657","url":"https:\/\/k12savings.com\/products\/market-sense-and-nonsense-isbn-9781118494561","provider":"K12savings","version":"1.0","type":"link"}