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SIMON & SCHUSTER Rockefeller Center 1230 Avenue of the Americas New York, NY 10020

Copyright © 1998 by David Dreman All rights reserved, including the right of reproduction in whole or in part in any form.

Simon & Schuster and colophon are registered trademarks of Simon & Schuster Inc.

Designed by Pagesetters/lPA

Manufactured in the United States of America 10 987654321

Library of Congress Cataloging-in-Publication Data

Dreman, David N.

Contrarian investment strategies : the next generation : beat the market by going against the crowd / David Dreman. p. cm.

Includes index.

L Speculation. 2. Stocks. 3. Investments. I. Title. HG604i.D658 1998

332.63228-dc21 98-14660

ISBN 0-684-81350-5

This publication contains the opinions and ideas of its author and is designed to provide useful advice in regard to the subject matter covered. It is sold with the understanding that the author and publisher are not engaged in rendering legal, financial, or other professional services. If the reader requires expert assistance or legal advice, a competent professional should be consulted.

The author and publisher specifically disclaim any responsibility for liability, loss, or risk, personal or otherwise, that is incurred as a consequence, directly or indirectly, of the use and application of any of the contents of this book.



SIMON & SCHUSTER Rockefeller Center 1230 Avenue of the Americas New York, NY 10020

Copyright © 1998 by David Dreman All rights reserved, including the right of reproduction in whole or in part in any form.

Simon & Schuster and colophon are registered trademarks of Simon & Schuster Inc.

Designed by PagesettersAPA

Memufactured in the United States of America 10 987654321

Library of Congress Cataloging-in-Publication Data

Dreman, David N.

Contrarian investment strategies : the next generation : beat the market by going against the crowd / David Dreman. p. cm.

Includes index.

1. Speculation. 2. Stocks. 3. Investments. I. Title. HG6041.D658 1998

332.63228-dc21 98-14660

ISBN 0-684-81350-5

This publication contains the opinions and ideas of its author and is designed to provide useful advice in regard to the subject matter covered. It is sold with the understanding that the author and publisher are not engaged in rendering legal, financial, or other professional services. If the reader requires expert assistance or legal advice, a competent professional should be consulted.

The author and publisher specifically disclaim any responsibility for liability, loss, or risk, personal or otherwise, that is incurred as a consequence, directly or indirectly, of the use and application of any of the contents of this book.



ACKNOWLEDGMEIVTS

losT ideas do not originate in a vacuum, and this is certainly true of this work. I have been fortunate to have been able to exchange views with some excellent thinkers on the Street. In particular, Id like to thank Jim Michaels, the editor-in-chief of Forbes, who I regard as the original contrarian, for being an invaluable mentor to me as a columnist for that magazine for almost twenty years. Jeff Schuss, John Dorfman, and the late Ted Halligan and Vartanig G. Vartan also constantly challenged and developed my thinking.

I am privileged to be acquainted with some of the pioneers studying the psychology of markets. Ive known Paul Slovic, one of the fathers of cognitive psychology, for over two decades, and am indebted to him for both his research and ideas. The same is true of the late Amos Tversky, one of the leading figures in this valuable discipline. Dr. Peter Neubauer, an internationally recognized psychiatrist, has also been important in influencing my thinking over the years. I would also like to thank members of the Board of the Institute of Psychology and Markets: Professor Vernon Smith, a pioneer in conducting experiments on investor behavior in markets; Professor Fred Renwick, a respected and original investment thinker; Arnie Wood, the President of Martingale Asset Management, and Professors John Schott and Richard Geist of the Harvard Medical School, all dedicated to helping investors understand the important influences of psychology in markets.

I owe an enormous debt to Dr. Eric Lufkin, the Director of Research of the Dreman Foundation, for his scrupulous statistical studies documenting many of the major findings presented here, as well as the extensive time he spent in supervising the research for this work. Drs. Nelson Woodard and Mitch Stern, both trained in quantitative econom-



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