PART ONE
Getting Started—Your Tool Kit
CHAPTER 1
Introduction 3
CHAPTER 2
What You Need to Know 11
CHAPTER 3
Information or Noise? 15
CHAPTER 4
Intuition 19
CHAPTER 5
Random Occurrences 23
CHAPTER 6
Law of Small Numbers 33
CHAPTER 7
Average Is Average 39
CHAPTER 8
Efficient Markets 45
CHAPTER 9
Random Walk 49
xi
PART TWO
Avoiding Torpedoes
CHAPTER 10
Perfect Earnings Forecasts 59
CHAPTER 11
Can Analysts Forecast Earnings Changes? 65
CHAPTER 12
Earnings Forecasts (and Torpedo Stocks) 71
CHAPTER 13
Using Earnings Forecasts 75
CHAPTER 14
Size Effect 81
CHAPTER 15
Price-Earnings Effect 85
CHAPTER 16
The Magic of Growth 91
CHAPTER 17
Estimate Revisions 95
PART THREE
Landmark Insights
CHAPTER 18
Nobel Laureate Markowitz 103
CHAPTER 19
Nobel Laureate Sharpe 117
CHAPTER 20
Compensation for Bearing Risks 123
CHAPTER 21
Daring to Be Different 131
xii CONTENTS
CHAPTER 22
Law of Active Management 137
CHAPTER 23
Nobel Laureate Nash and Keynes 141
CHAPTER 24
Nobel Laureates Kahneman and Smith 149
CHAPTER 25
What Guides Investors 161
PART FOUR
Dissecting Returns
CHAPTER 26
Luck or Skill? 169
CHAPTER 27
Measuring Investment Returns 181
CHAPTER 28
Anatomy of the S&P 500 191
CHAPTER 29
Returns Earned by Investors 199
CHAPTER 30
Market Timing versus Asset Allocation 203
CHAPTER 31
Market Timing: Risk versus Reward 205
CHAPTER 32
Know the Odds Before You Play the Game 211
CHAPTER 33
Ten Best Days 215
Contents xiii
PART FIVE
Putting the Pieces Together
CHAPTER 34
Trading Costs 221
CHAPTER 35
Mutual Funds 227
CHAPTER 36
231
CHAPTER 37
Style Persistence 235
CHAPTER 38
Asset Allocation 239
CHAPTER 39
Beware of Taxes 245
CHAPTER 40
Beyond Active versus Passive 249
CHAPTER 41
Long-Term Capital Management 255
CHAPTER 42
To Win the Game 263
CHAPTER 43
Highlights 271
Notes 277
Index 299
xiv CONTENTS
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