LinkFest

Kahneman and Taleb

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Great post over on dshort focusing on serial correlation in market returns. 

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Arnott on fundy indexing and vol as an asset class.

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Why SPAC Investors Should Listen to the Market

Abstract:     
Special purpose acquisition companies (SPACs) have raised around $21bn from investors since 2003, and comprised 20% of total funds raised in US IPOs in 2007. SPACs are interesting structures – allowing investors a risk-free option to invest in a future acquisition. However, we show that one-half of approved deals immediately destroy value. Investors, who can observe the market’s view of the proposed deal, as well as that of the founders, should listen to the market, since the extreme incentives faced by the SPAC founders create corresponding conflicts of interest. We propose a simple, observable rule – based on market prices – which investors should heed.

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A review of my 5 ideas for 2009 since a couple focused just on January. 

1.  Follow a simple tactical asset allocation model.   Working great so far.

2.  Look for a particularly pronounced January Effect in beaten down microcaps.  Poor but mixed.  Small caps and microcaps performed poorly – down around 10% and 13% respectively vs. down around 8% for large caps.  I mentioned two stock screens as well.  The first was down a whopping 20% while the second was up around 6%.  The second screen used insider buying as a screen criteria, so maybe beaten down stocks that are experiencing heavy insider buying are good opportunities right now?  The performance was also much better when you pulled the start date back to mid-December.

3.  Look for a bounce across the board in January.  Dead wrong – on average asset classes were down around 10%.  Worst Jan ever for stocks.

4.  Follow the smart money. Great (relatively).  The stocks mentioned that were the most popular Tiger Cubs holdings were up 1% on average.

5.  Get long Japan. Wrong (so far).