Expectations Investing

What Hacker News says

1. tchallaOct 2021
   Stock prices can be right or wrong. Here’s the interesting question - What should Facebook financials look like to justify its stock price now? You can read “Expectations Investing” to find out the approx “correctness” of $FB current market price.
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2. megadrive16Sep 2016
   Here are my recommendations. This list is optimised to teach you the fundamentals of economics and finance, give you alternative perspectives on status quo economic/financial thinking and then equip with you with tools, ideas, and concepts to come up with original investment ideas and increase the likelihood that they are going to actually make you, your clients, and your firm a lot of money without anybody getting grilled by the House Financial Services Committee, the SEC, or ending up in jail.

   1.) Get a recent copy of the CFA curriculum and do the end of chapter exercises. You can probably skip a lot of the quantitative methods material if you’re doing a degree in stats. The CFA curriculum will give you a solid understanding of all the major sub-categories of economics (micro, macro, corporate finance, security analysis, accounting, financial statement analysis, alternative investments, derivatives, portfolio management, and most importantly ethical standards for financial professionals.

   2.) Read the Economics Anti-Text Book to crush any illusion that the neoclassical economic paradigm, which the CFA curriculum is based on, is the only scholarly interpretation of how economics works in the real world. Then read it again. If you’re really a diehard scholar read some of the alternative economics papers that the book references.

   3.) Find a good book or paper that covers Rational Choice Theory in depth. Then, at least, read Kahneman and Tversky (1979). If you can, read all of Kahneman and Tversky’s papers. This should also help clear any illusion that humans being are rational agents, which is a cornerstone of neoclassical economics, and give you a foundation for thinking about how people in markets really make decisions.

   4.) Read Fooled by Randomness to get more alternative thinking on decision making and how finance and economics works in the real world vs. the textbook stuff that you’re going to learn via the CFA curriculum.

   5.) Read Business Dynamics (Sterman, 2000) to learn how to model systems the “right” way.

   6.) Read Best Practices for Equity Research Analysts (Valentine). Regardless if you want to be an equity analysis or not, this book is the best book around if you want to learn how to organise yourself to succeed working day-today in an investment decision making role. Just think about the equity specific aspects in the context of whatever category of finance you’re interested in.

   7.) The Sleuth Investor (Mandelman). A lot to people complained that some of this book’s suggestions cross an ethical line. I disagree. Again, this books will give you an alternative perspective about how economic agents gather information on the critical factors that will move the variables they’re interested in (e.g. stock prices, bond ratings, commodity prices, earnings, etc). It’s basic premise is get out of the building and collect HUMINT (echoing Valentine more aggressively) like a CIA case officer instead of a nerd in a cube reading the same 10K’s, sell-side research, as everybody else.

   8.) Expectations Investing (Mauboussin) is a must read for how to come up with contra-consensus investment ideas and get it right.

   9.) Investing: The Last Great Liberal Art is a must read for learning how to incorporate information from other fields (physics, biology, sociology, etc) into your economic analysis.

   10.) (Optional) Diaminds: Decoding the Mental Habits of Successful Thinkers that challenges you to think about your thinking and assess how great business thinkers think. Not a economics but definitely will help you become a better economic thinker.

   Good luck!

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3. tpengDec 2013
   Price-implied expectations

   http://www.amazon.com/Expectations-Investing-Reading-Prices-...

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