The Effective Investor: Lessons from an African Emerging Market

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Franco Busetti, 2009 - Business & Economics - 512 pages
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 Stock markets are not efficient, returns are incommensurate with risk, investors are irrational, bubbles and crashes recur regularly, analysts are usually wrong, economists even more so, luck is mostly mistaken for skill, myths and misconceptions abound and most of the industry participants are simply noise generators. 

This is even more true for emerging markets. South Africa can be termed a developed emerging market and is the newest member of the BRICS group. The Effective Investor is the first book to deal specifically with investing in the South African stock market, filling a surprising gap given the widespread interest that has been shown in South Africa as an emerging market and the gateway to the resource-rich African continent. Understanding the South African market provides insight into the paths that emerging and frontier markets will follow in future. While the investment lessons from the South African market outlined in this book are universal, understanding some of its peculiarities is also important. For example, some insight into the behaviour of the currency, the rand, is clearly critical in terms of any investment in this market, as well as in providing some understanding of other volatile emerging market currencies, as well as because it is often treated as the most liquid proxy for these currencies, particularly during upheavals. Similarly, the techniques highlighted in the book for dealing with volatility are applicable to similar markets elsewhere. South Africa is also an attractive market in its own right. It has been the third-best performing stock market in the world since 1900, and has weathered the great financial crisis with flying colors. The book provides readers with the findings of leading-edge research conducted into the South African stock market, the results of which are normally reserved for professional institutions and is written by a practicing, top-rated investment professional.The book also has guest contributions from some of South Africa's most astute professional analysts and fund managers on their specific areas of expertise, providing exceptional insight into current investment thinking. The Effective Investor is essential reading for every potential, novice or professional investor and investment adviser in emerging markets who wants to understand the most important principles of the South African stock market to ensure successful investing. 
 

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Contents

Componentsofreturn
1-6
Calculating returns The composition of themarket
1-51
49 years
5-1
Bulls are bigger than bears
5-10
The wealthof patience The value of compounding
5-24
Interest rate forecasts
5-32
Theonly economics
5-41
The frailtiesof forecasts
5-58
Investing offshore Global returns How much equity offshore?
16-30
Investor behaviour
16-43
In a nutshell Which stocks are most prone to sentiment?
16-59
Using prediction markets
16-73
Bubblesand crashes
2
Debunking some myths
26-20
Benfords
29-5
Agentbased modelling mimicking markets
29-18

The biases in forecasts
5-64
The limitsof forecasting
5-74
Managing risk
5-88
But not always
5-92
Portfolio theoryin anutshell How many stocks doyouneed Major asset class optimisation in your portfolio?
15-10
About therand The randhasa memory How likelyare largemovements?
16-9
LOOKING AFTER YOURSELF Chapter 32Howto chooseafund manager
29-38
Lets briefly be nice to analysts Good recommendations equal poor revenue
29-52
Doing it yourself First know yourself The components ofreturnyou can control
29-75
The advice
29-87
Copyright

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About the author (2009)

Franco Busetti has been an investment professional for over 25 years. Originally trained as a chemical engineer, he has also completed a B.Comm. (Hons) in economics, the CFA, a B.Sc. and an M.Sc. in artificial intelligence.

He was Head of Research at Absa Securities before becoming Strategist and Head of Quantitative Research at JP Morgan, Credit Suisse Standard Securities and Head of Strategy at Macquarie First South Securities. 

Franco has been rated 50 times in ten different investment categories in the Financial Mail analyst ratings, and has been ranked first in investment strategy, quantitative research and innovative research.

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