What Works on Wall Street : A Guide to the Best-Performing Investment Strategies of All Time,9780070482463

What Works on Wall Street : A Guide to the Best-Performing Investment Strategies of All Time

by
Edition: 2nd
ISBN13: 9780070482463
ISBN10: 0070482462
Format: Hardcover
Pub. Date: 1998-05-31
Publisher(s): MCG
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Summary

"The best investment book of 1996. Very likely, it will be the most influential book on investing in this decade."­­Stock Traders Almanac "...O'Shaughnessy's conclusion that some strategies do produce consistently strong results while others underperform could shake up the investment business."­­Barron's The New York Times and Business Week bestseller, What Works on Wall Street is now updated throughout to include the new data and 50 new sample portfolios. Hailed as "a great book" by Forbes, What Works on Wall Street is a must read for any investor looking to make savvy, historically informed decisions.

Author Biography

James P. O'Shaughnessy is Chairman and CEO of O'Shaughnessy Capital Management, Inc.

Table of Contents

Preface xv
Acknowledgments xix
Stock Investment Strategies: Different Methods, Similar Goals
1(10)
Traditional Active Management Doesn't Work
2(3)
What's the Problem?
5(1)
Studying the Wrong Things
5(1)
Why Indexing Works
6(2)
Pinpointing Performance
8(1)
Discipline Is the Key
8(1)
Consistency Wins
9(1)
A Structure Portfolio in Action
9(1)
Overwhelmed by Our Nature
9(2)
The Unreliable Experts: Getting in the Way of Outstanding Performance
11(10)
Human Judgment Is Limited
12(1)
What's the Problem?
13(1)
Why Models Beat Humans
13(1)
Base Rates Are Boring
14(1)
The Individual Versus the Group
15(1)
Personal Experience Preferred
16(1)
Simple Versus Complex
16(1)
A Simple Solution
17(4)
Rules of the Game
21(14)
Short Periods Are Valueless
22(1)
It's Different This Time
22(1)
Anecdotal Evidence Is Not Enough
23(1)
Potential Pitfalls
24(2)
Rules of the Game
26(9)
Ranking Stocks by Market Capitalization: Size Matters
35(22)
How Much Better?
37(4)
Reviewing Stocks by Size
41(1)
Small Stocks Are the Winners, But Not by Much
42(5)
Implications for Investors
47(5)
Our Two Benchmarks
52(5)
Price-to-Earnings Ratios: Separating the Winners and Losers
57(22)
The Results
58(1)
Large Stocks Are Different
58(6)
High PE Ratios Are Dangerous
64(4)
Large Stocks Fare No Better
68(1)
Deciles
69(1)
Implications
70(9)
Price-to-Book Ratios: A Better Gauge of Value
79(22)
The Results
80(1)
Large Stocks Are Less Volatile
80(2)
Base Rates More Consistent for Large Stocks
82(1)
High Price-to-Book Stocks Do Poorly
82(12)
Deciles
94(5)
Implications
99(2)
Price-to-Cashflow Ratios: Using Cash to Determine Value
101(20)
The Results
102(1)
Large Stocks Are Less Volatile
102(6)
High Price-to-Cashflow Ratios Are Dangerous
108(1)
Large Stocks Hit Too
108(6)
Deciles
114(2)
Implications
116(5)
Price-to-Sales Ratios: The King of the Value Factors
121(22)
The Results
122(1)
Large Stocks with Low Price-to-Sales Ratios Do Well
122(1)
High PSR Stocks Are Toxic
122(11)
Large Stocks Do a Little Better
133(1)
Deciles
133(1)
Implications
134(9)
Dividend Yields: Buying an Income
143(14)
The Results
144(1)
Large Stocks Entirely Different
144(1)
Deciles
144(5)
Implications
149(8)
The Value of Value Factors
157(14)
Risk Doesn't Always Equal Reward
161(1)
Is It Worth the Risk?
161(2)
Embrace Consistency
163(1)
Large Stocks Are Different
164(1)
Implications
164(7)
One-Year Earnings-Per-Share Percentage Changes: Do High Earnings Gains Mean High Performance?
171(20)
Examining Annual Earnings Changes
172(3)
Large Stocks Do Worse
175(1)
Buying Stocks with the Worst Earnings Changes
175(1)
Large Stocks Do Better
175(7)
Deciles
182(8)
Implications
190(1)
Five-Year Earnings-Per-Share Percentage Changes
191(14)
The Results
191(1)
Large Stocks Are Similar
192(1)
Deciles
192(11)
Implications
203(2)
Profit Margins: Do Investors Profit form Corporate Profits?
205(14)
The Results
205(1)
Large Stocks Do Slightly Better
206(1)
Deciles
206(11)
Implications
217(2)
Return on Equity
219(14)
The Results
219(1)
Large Stocks Do a Bit Worse
220(1)
Deciles
220(11)
Implications
231(2)
Relative Price Strength: Winners Continue to Win
233(20)
The Results
234(1)
Large Stocks Do Better
235(1)
Why Price Performance Works While Other Measures Do Not
235(5)
Buying the Worst-Performing Stocks
240(1)
Large Stocks Also Hit
240(1)
Deciles
240(12)
Implications
252(1)
Using Multifactor Models to Improve Performance
253(18)
Adding Value Factors
253(1)
What About Other Value Factors?
254(1)
Price-to-Sales Ratio Better Still
254(1)
Additional Factors Add Less to Large Stocks
255(6)
Price-to-Sales Ratio Does Well Too
261(1)
What About Growth Factors?
261(5)
Two Growth Models
266(1)
Return on Equity Does Better Still
266(3)
Large Stocks Less Dramatic
269(1)
Implications
269(2)
Two Multifactor Value Models for All Stocks
271(8)
Using Several Value Factors
271(1)
The Results
272(1)
Value Factors Overlap
272(3)
A Multifactor Model Using Price-to-Sales Ratios
275(1)
Implications
275(4)
Finding Value Among the Market's Leaders: A Cornestone Value Strategy
279(16)
An Alternative to Indexing to the S&P 500
280(1)
High PE Ratios Hinder Even Market Leaders
280(5)
Low PE Ratios Help
285(1)
High Yield Works Better Still
285(1)
Better in Bull Markets, Too
286(1)
Implications
286(9)
Searching for a Cornerstone Growth Strategy
295(14)
Traditional Growth Factors Fall Short
296(1)
Higher Earnings More Valuable
296(2)
Uniting the Two Models for a Cornerstone Growth Approach
298(1)
Growth Strategies Are Less Effective with Large Stocks
298(9)
Implications
307(2)
Uniting Strategies for the Best Risk-Adjusted Performance
309(12)
The Results
310(3)
The United Strategy Also Outperforms Large Stocks
313(1)
Implications
313(8)
Ranking the Strategies
321(18)
The Results
321(1)
Absolute Returns
322(5)
Risk
327(1)
Risk-Adjusted Return
327(10)
Implications
337(2)
Getting the Most out of Your Equity Investments
339(4)
Always Use Strategies
340(1)
Use Only Strategies Proven over the Long Term
340(1)
Invest Consistently
341(1)
Always Bet with the Base Rate
341(1)
Never Use the Riskiest Strategies
341(1)
Always Use More Than One Strategy
341(1)
Use Multifactor Models
342(1)
Insist on Consistency
342(1)
The Stock Market Is Not Random
342(1)
Appendix: Research Methodology 343(8)
Data
343(1)
Time Horizon
343(1)
Universe
343(1)
Returns
344(1)
Data Definitions
345(2)
Formulas
347(2)
Tases, Commissions, and Market Impact Costs
349(2)
Bibliography 351(6)
Index 357

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