Whatever ones political leanings, it must be admitted that Keynes was an authentic genius. His seminal Treatise on Probability, written at age 38, was deemed by no less an authority than Bertrand Russell to be one which it is impossible to praise too highly.
Here we report on some interesting lore about Keynes and his intellectual development.
Most importantly, however, is a short essay (included here) that he wrote about the stock market. This essay is considered by many (from Barton Biggs to Nobel laureate James Tobin) to be the most penetrating four pages in print about the machinations of the stock market.

Examines reasons for the extended history of superior performance of value related stock selection strategies such as high yield, low price/book, low price/earnings and low price/sales.
Provides a behavioral and empirically based explanation for the past superior performance of these investment strategies.
Examines some of the conceptual underpinnings for the distinction between growth and value investing
Is based on an earlier draft and therefore contains some empirical data that is out of date. Still, we doubt the zebra has changed its stripes in regard to the inferences that can be drawn from this earlier research.

Consists of an explanation / clarification of the article, Earnings Expectations and Security Prices, that is discussed in the following comment on this article.

Published in the Sept/Oct issue of The Financial Analysts Journal.
Was one of the earliest articles to highlight the consistant relationship that exists between consensus earnings estimate revisions/earnings surprises and stock prices.
Over a 24 quarter period examined portfolios (comprised of 20 stocks) each that had experienced the largest increases (or revisions) in their consensus earning estimates. The average 12 month return for these portfolios was 29.1% compared to 18.7% for the selection universe and 12.0% for the S&P 500.
Also introduced a new method of evaluating portfolio performance that consisted of ranking each portfolio's return within a sample of 1,000 random portfolios drawn from the selection universe. The test portfolios achieved an average rank of 783 (out of 1,000) which statistically speaking had a one in five million chance of being due to luck,

Conditionally accepted for publication in The Financial Analyst Journal. I procrastinated and did not clean it. It has been refurbished now and is included here.
Updates performance results found in Earnings Expectations and Security Prices (for portfolios with the highest revisions in their consensus earnings forecasts) for 12 additional quarters. Performance was similar to that in the previous study
Answers the question: How should we expect this stock selection model to perform in bear markets?

Bill Bennet made an outlandish statement about abortion and the nation's crime rate a couple of years ago that created a tempest in the national press. This article attempts to sort out the controversy.

This study examines long-term performance for three value related investment criteria: Price/Earnings, Price/Book and Price/Sales. The universe for the study consisted of all 620 stocks with continuous coverage in Compustat for the 20 years ending December 31, 1986.
Equally weighted portfolios comprised of 100 stocks were selected at quarterly intervals and rebalanced every three months. The first portfolio was selected on 3-31-68 and the last on 9-30-86, for 75 quarters in all. Because knowledge of latest 12 month's EPS, Book Value and Sales depend upon the availability of corporate quarterly reports, a one-quarter lag for this data was employed.
The principal findings of this research are shown in a number of tables and graphs. They show that results for all three of the criteria were exceptional, with the low P/E model doing 6.3 times as well as the healthy 494% gain for the S&P 500.


The Value Line Timeliness Rating is renown for its ability to outperform the market over extended periods of time on a risk adjusted basis, as was made clear in Fischer Blacks seminal article, Yes,Virginia There is Still Hope.
The current article focuses on the fundamental investment criteria that determine the Timeliness Rating for the best ranked (#1)stocks and the lowest ranked (#5) stocks.
The results are just what a good quantitative financial analyst would expect.

Shows how diversification and weighting across fundamental investment criteria can enhance the expected performance of a given portfolio.

Examines performance of stocks in the DJIA to illustrate the clear implausibility that price changes for these stocks are driven by a quest to keep them in line with their intrinsic values -- defined as the (risk adjusted?) discounted present value of all future dividends over an infinite horizon.


Examines from a number of perspectives the extremely tight relationship that exists between changes in reported earnings and stock prices across stocks iincluded in the S&P 500 index.
Contains detailed data on the power of this relationships for the nine years. 2001-2009.
Reviews both the absolute data and decile rankings to smoke out the closeness of fit between earnings changes and price changes.
Includes dramatic graphs and tables depicting these relationships.
Raises serious doubt about the efficient market hypothesis and the theoretical underpinnings of the CAPM given the glue-like relationship between reported EPS and changes in stock prices.
The Efficient Market Hypothesis is tied inexorably to the concept of intrinsic value defined as the (risk adjusted?) discounted present value of all future dividends, presumably over an infinite horizon. In point of fact, nothing could be further from the truth!

Consists of several charts and tables illustrating the strong relationship that exists between consensus earnings estimate revisions and stock prices.

As J.C. Van Horne (in Financial Management and Policy) once noted: The yield to maturity or internal rate of return for a bond implies that all cash flows are reinvested at the yield to maturity rate.
Although the conventional definition of yield to maturity found in most financial texts conforms to the above statement, this article shows that financial equivalency (measured by the time value of money) will always be obtained when two bonds with different coupon rates, market prices and discounts have the same yield to maturity even though no reinvestment of coupons takes place.

Published in the Sept/Oct issue of The Financial Analysts Journal.
Was one of the earliest articles to highlight the consistant relationship that exists between consensus earnings estimate revisions/earnings surprises and stock prices.
Over a 24 quarter period examined portfolios (comprised of 20 stocks) each that had experienced the largest increases (or revisions) in their consensus earning estimates. The average 12 month return for these portfolios was 29.1% compared to 18.7% for the selection universe and 12.0% for the S&P 500.
Also introduced a new method of evaluating portfolio performance that consisted of ranking each portfolio's return within a sample of 1,000 random portfolios drawn from the selection universe. The test portfolios achieved an average rank of 783 (out of 1,000) which statistically speaking had a one in five million chance of being due to luck,

Uses a comprehensive model designed by the writer for Excel that examines the Discounted Present Value and/or the Internal Rate of Return of a stock from 12 different perspectives.
After extensive practice with the model I concluded that the notion common stocks have, can, or will be correctly priced at their true intrinsic values defined as the (risk adjusted?) discounted present value of all future dividends over an infinite horizon is a pipe dream

Describes a conventional rank-order selection model designed by this writer using Lotus 123 macros.
Works in combination with the Value Line 1,700 stock database.

Lists 6 reasons that quantitative stock selection strategies keyed to fundamental investment criteria (such as low P/E, low Price/Book Value, low Price/Sales, Large Earnings Estimate Revisions, Large Earnings Surprises and Small Company Size) are viewed by traditional money managers as pure anathema.

This proposal made in 1979 is a little out of date. However, it does show the degree to which the stock market was chronically undervalued at the time setting the stage for a 2,581.3% rise during the ensuing 20 years, 1979-1999.

This article, published in the July 1985 issue of Wall Street Computer Review, provides a snapshot of the writer's early experiences with quantitative investing. WHAT FOLLOWS ARE SUMMARY DESCRIPTIONS OF ARTICLES IN THE WEBSITE'S MISCELLANEOUS SECTION

Examines differences in returns over the past 85 years between the S&P 500 and Longterm Corporate Bonds.
Introduces the notion that the use of total holding period returns for these securities makes a much clearer statement of return differences than the use of compound annual rates.
Provides a clear and concise explanation of the magic of compound interest or growth.
Examines some of the critical problems that analysts face when attempting to predict future returns on common stocks or for major market indices.

Simply quotes the written word of these two titans of finance to see who mostly captures reality insofar as the long-term differences in risk between stocks and bonds is concerned.


Asks the question: Where did all the corporate subscribers to the Journal of Finance flee from the end of 1979 (140 subscribers) to the end of 1983 (14 subscribers)? Did they simply conclude that the financial rocket scientists in academia had gotten out of control?

Makes an analogy between Samuelson's disdain for the notion of a rational and efficient free market economy with the notion that common stocks are always efficiently and correctly priced at their intrinsic values defined as the (risk adjusted?) discounted present value of all future dividends over an infinite horizon.

Looks at the huge salaries on Wall Street and asks: If the financial sector is so adroit at efficiently / correctly pricing common stocks, how could it have made such a mess out of pricing its own services?

Is investing an art or a science as market sages have long debated?
This article looks at the question from the point of view of two theorists (Noble laureates. Markowitz and Sharpe) and two distinguished practitioners ( Keynes and Graham).
Simply points out that these two sets of observers could not be more divided in their perceptions of the reality of the market place.

Examines the mathematical language on which the Capital Asset Pricing Model/Beta is based and raises fundamental questions about how millions of investors could have been expected to take its assumptions seriously (whether in the past, present or future) given their lack of understanding of the complex math on which the model depends.
Also questions what past tests of Beta were actually testing.

Conditionally accepted for publication in The Journal of Portfolio Management. Submitted in 1981, once again I procrastinated Finally completed the article about threee years ago and showed it to Peter Bernstein before he died.
Explores metaphorically the close relationship that exists between physics and modern capital market theory i.e., Portfolio Selection and the Capital Asset Pricing Model.
Challenges economic positivism on which the CAPM is fundamentally, or spiritually, grounded.

This article demonstrates that the stock market is not at all efficient in the way that it was originally claimed to be.

A missed opportunity if ever there were one.my convictionabout the wisdom of this was so strong that I bought 1 share of each Dow stock in 1967 but could not implement my plan. Meanwhile, a Dow Jones indexed mutual fund was offered to the public in March 1998 by Waterhouse Securities.

Justin Fox has written an elegant and insightful book, The Myth of the Rational Market, that thoroughly documents a half century of confusion and misinformation (under the guise of the efficient market hypothesis which is a primary target of this Website) about the behavioral underpinnings of the U.S. stock market
No less an authority than the late Peter Bernstein observed: "This wise and witty book is must reading for anyone who wonders what makes financial markets tick.Barrons referred to it as "A lucid, lively and learned account," while The Economist praised it as "An intellectual tour-de-force..."
This section contains two reviews of the book. One by Roger Lowenstein from The Washington Post and the other by Noble laureate Paul Krugman from The New York Times.