A Non-Random Walk Down Wall Street

FROM THE PUBLISHER

For over half a century, financial experts have regarded the movements of markets as a random walk -- unpredictable meanderings akin to a drunkard's unsteady gait -- and this hypothesis has become a cornerstone of modern financial economics and many investment strategies. Here, Andrew W. Lo and A. Craig MacKinlay put the Random Walk Hypothesis to the test. In this volume, which elegantly integrates their most important articles, Lo and MacKinlay find that markets are not completely random after all, and that predictable components do exist in recent stock and bond returns. Their book provides a state-of-the-art account of the techniques for detecting predictabilities and evaluating their statistical and economic significance, and offers a tantalizing glimpse into the financial technologies of the future.

FROM THE CRITICS

Peter Coy - Business Week

But markets don't know everything, say the authors of A Non-Random Walk Down Wall Street. People who devote enough time, money, and brain power can beat the market by finding undervalued companies or discovering persistent price patterns, say Lo and MacKinlay. Their profits are "simply the fair reward to breakthroughs in financial technology," they argue.

Constance Loizos - Investment News

Here's an interesting case for actively managed mutual funds over index funds. Performance numbers for the active managers would be a lot better if you looked only at nimbler new funds and left out the bloated old ones that are the real underperformers. "Active funds that have been more recently invested outperform in a significant way the active funds that were long ago invested," Wharton School Professor A. Craig MacKinlay observed during the Investment Management Consultants Association conference in San Francisco late last month.

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