STREET DOGS: Buffett vs Jensen on stock analysis
Michel Pireu: The idea of value stocks has stuck, but the debate still rages over risk
From Losing My Religion by Samuel Lee at Morningstar: It’s May 17 1984 and Columbia University is hosting a debate in celebration of the 50th anniversary of the publication of Benjamin Graham and David Dodd’s classic Security Analysis. On the offensive is Michael Jensen, a University of Rochester professor, who’s there to stump for efficient markets, a near-unanimous academic consensus. On the defensive is Warren Buffett, Graham’s most famous disciple and already recognised as one of the greatest investors alive. Jensen recites a litany of studies showing no statistically significant evidence of skill. He describes the fund industry as a coin-flipping game — enough coin-flippers and someone’s bound to enjoy a long streak that in isolation looks impossible. Buffett asks you to imagine a national coin-flipping contest with all 225-million Americans. Daily the participants call out heads or tails. If they’re wrong, they drop out. After 20 days 215 coin flippers will have called 20 flip...
Would you like to comment on this article?
Sign up (it's quick and free) or sign in now.
Please read our Comment Policy before commenting.
Subscribe now to unlock this article.
Support BusinessLIVE’s award-winning journalism for R129 per month (digital access only).
There’s never been a more important time to support independent journalism in SA. Our subscription packages now offer an ad-free experience for readers.
Cancel anytime.
Questions? Email helpdesk@businesslive.co.za or call 0860 52 52 00. Got a subscription voucher? Redeem it now.