A Random Walk Down Wall Street Including A Life-Cycle Guide To Personal Investing

566 Pages·2007·4.93 MB·English

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A Random Walk Down Wall Street
Including A Life-Cycle Guide To Personal Investing
Burton G. Malkiel
Chemical Bank Chairman's
Professor of Economics
At Princeton University

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Copyright © 1999, 1996, 1990, 1985, 1981, 1975,
1973
by W. W. Norton & Company, Inc.
All rights reserved
Printed in the United States of America
The text of this book is composed in Zapf Elliptical with the display set in
Berling.
Desktop composition by Justine Burkat Trubey
Manufacturing by the Haddon Craftsmen, Inc.
Library of Congress Cataloging-in-Publication Data
Malkiel, Burton G.
A random walk down Wall Street : including a life-cycle guide
to personal investing / Burton G. Malkiel.
p. cm.
Rev. ed. of: a random walk down Wall Street. c1996.
Includes bibliographical references and index.
ISBN 0-393-04781-4
1. Investments. 2. Stocks. 3. Random walks (Mathematics)
I. Malkiel, Burton G. Random walk down Wall Street. II. Title.
HG4521 .M284 1999
332.6�dc21 98-50671
CIP
W. W. Norton & Company, Inc., 500 Fifth Avenue, New York, N.Y.
10110
http://www.wwnorton.com
W. W. Norton & Company Ltd., 10 Coptic Street, London WC1A 1PU
2 3 4 5 6 7 8 9 0

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To Nancy

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CONTENTS
Preface 13
Acknowledgments from Earlier 17
Editions

Part One
Stocks and Their Value
1. Firm Foundations and Castles in the 23
Air
What Is a Random 24
Walk?
Investing as a Way of Life 26
Today
Investing in 28
Theory
The Firm-Foundation 29
Theory
The Castle-in-the-Air Theory 31
How the Random Walk Is to Be 33
Conducted
2. The Madness of 35
Crowds
The Tulip-Bulb 36
Craze
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The South Sea 39
Bubble
The Florida Real Estate 45
Craze
Wall Street Lays an 46
Egg
An 53
Afterword
3. Stock Valuation from the Sixties through the 55
Nineties
The Sanity of 55
Institutions
The Soaring 57
Sixties
The New "New Era": The Growth-Stock/New-Issue 57
Craze
Synergy Generates Energy: The Conglomerate 61
Boom
Performance Comes to the Market: The Bubble in Concept 69
Stocks
The Sour 73
Seventies
The Nifty 73
Fifty
The Roaring 76
Eighties
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The Triumphant Return of New 76
Issues
Concepts Conquer Again: The Biotechnology 78
Bubble

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The Chinese Romance with the Lycoris Plant 80
Some Other Bubbles of the 81
1980s
What Does It All 85
Mean?
The Nervy 85
Nineties
The Japanese Yen for Land and 85
Stocks
The Internet Craze of the Late 90
1990s
A Final 94
Word
4. The Firm-Foundation Theory of Stock 95
Prices
The "Fundamental" Determinants of Stock 96
Prices
Two Important 103
Caveats
Testing the 106
Rules
One More 108
Caveat
What's Left of the Firm 111
Foundation?
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Part Two
How the Pros Play the Biggest Game in Town
5. Technical and Fundamental 117
Analysis
Technical versus Fundamental 118
Analysis
What Can Charts Tell 119
You?
The Rationale for the Charting 124
Method
Why Might Charting Fail to 126
Work?
From Chartist to 127
Technician
The Technique of Fundamental 128
Analysis
Why Might Fundamental Analysis Fail to 132
Work?
Using Fundamental and Technical Analysis 134
Together
6. Technical Analysis and the Random-Walk 138
Theory
Holes in Their Shoes and Ambiguity in Their 138
Forecasts
Is There Momentum in the Stock 140
Market?
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Just What Exactly Is a Random 142
Walk?
Some More Elaborate Technical 145
Systems
The Filter 146
System
The Dow 146
Theory
The Relative-Strength 147
System
Price-Volume 148
Systems
Reading Chart 148
Patterns
Randomness Is Hard to 149
Accept
A Gaggle of Other Technical Theories to Help You Lose 150
Money

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