Investment Philosophies: Successful Strategies and the Investors Who Made Them Work

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John Wiley & Sons, Jan 20, 2003 - Business & Economics - 504 pages
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Since the inception of the financial markets, investors have been bombarded with sales pitches from experts claiming to have found the secret formula or the magic model that guarantees investment success. In one corner, you have seasoned veterans telling you to buy businesses with solid cash flows and liquid assets because that's what worked for Warren Buffett. In another, you have financial professionals advising that in the new world of technology, you have to bet on companies with solid growth prospects. And still others recommend passive index investment as the way to outperform most active investors, or nontraditional investment strategies that have worked for a select group of successful hedge funds. The only thing this barrage of claims and counterclaims has created is investor confusion.

To successfully implement any investment strategy, you must first adopt an investment philosophy that is consistent at its core and which matches not only the markets you choose to invest in, but your personal preferences (risk tolerance, time horizons, etc.). In Investment Philosophies: Successful Strategies and the Investors Who Made Them Work, Aswath Damodaran will help you do this by going beyond the simple explanations of traditional and alternative investment strategies, to discuss the individual underlying philosophies that support these techniques.

Investment Philosophies explores many of the time-tested investment philosophies that investors have used over the years-from value investing and growth investing to technical analysis and market timing-and discusses some of the investors who made these philosophies work. This unique book will expose you to a wide range of investment philosophies to give you a sense of what drives investors in each philosophy, how they attempt to put these philosophies into practice, and what determines ultimate success. Damodaran offers an unbiased forum for the presentation of different investment philosophies, while supplying you with the tools-the definition and measurement of risk, the notion of market efficiency and how to test for inefficiencies, the components and determinants of trading costs-and the empirical evidence to make your own judgments on the investment philosophy that fits your specific investment goals and views of how markets work.

Filled with valuable insights, useful formulas, and comprehensive charts, this book provides you with the tools to pick an investment philosophy that is right for you. With Investment Philosophies as your guide you can be more confident in the way you or your fund managers invest.
 

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Contents

CHAPTBM
1
CHAPTB2
14
CHAPTH3
41
BVBM
72
Relative Valuation
94
Valuing an Asset with Contingent Cash Flows Options
102
Traded Financial Assets
108
Trading Costs with NonTraded Assets
122
Activist Growth Investing
302
Conclusion
310
Trading on Private Information
316
Trading on Public Information
331
Implementing an InformationBased Investment Strategy
347
Near Arbitrage
374
GMFTBM2
380
Speculative Arbitrage
381

Conclusion
136
Closing Thoughts
155
Conclusion
171
Investor Irrationality
186
The Foundations of Technical Analysis
201
CHAPTH18
219
The Contrarian Value Investor
243
Activist Value Investing
251
Conclusion
266
Conclusion
388
CHAPTBU3
433
The Case for Indexing
441
Why Do Active Investors not Perform Better?
459
Alternative Paths to Indexing
466
Conclusion
473
Finding an Investment Philosophy
480
INDEX
499
Copyright

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About the author (2003)

ASWATH DAMODARAN is Professor of Finance at New York University's Leonard N. Stern School of Business. He has been the recipient of numerous awards for outstanding teaching, including the NYU university-wide Distinguished Teaching Award, and was named one of the nation's top business school teachers by BusinessWeek in 1994. In addition, Damodaran teaches training courses in corporate finance and valuation at many leading investment banks. He is the author of Investment Valuation, Corporate Finance, Investment Management, and Applied Corporate Finance, all published by Wiley, as well as The Dark Side of Valuation.

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