quarterly, 91-92, 120, 121-23, 124, 126, 132, 133,200,246, 389-90, 439n

recovery of, 267, 268, 271-75

reports of, 104, 131,389-90

stock prices and, 88, 93, 94, 101, 108,

117-36, 385-94 surprises in, see surprises, earnings volatility of, 95-96, 102-4

Eastwood, Clint, 69-70

economic activity:

forecasts of, 72, 76, 79, 97, 101, 104, 223-24

impact of, 142, 217-18, 292-94, 315, 368

statistics on, 223-24 economics, modern, 298, 377-79 Education of a Speculator, The (Niederhoffer), 217 Edwards, Benjamin R, 337 efficient market hypothesis (EMH), 34-37, 59-64, 373-98 as academic theory, 34-37, 59-64, 347, 372, 373, 376, 394, 396-97 anomalies of, 37, 383-85, 395 contrarian strategy vs., 140, 150, 151-53, 154, 178, 374, 376, 384, 385, 396 correlations and, 380-81 efficiency principle in, 34-35, 87, 376-77, 381-83, 386, 388, 395, 446n

failure of, 374, 375-77, 394-97 as hypothesis, 34-37, 377, 394-97 influence of, 22-23, 30, 34-35, 63-64, 373-75

information analysis in, 381-82, 385-94

investor psychology and, 35, 36, 150,

248, 3478, 352, 364, 370, 372,

375-77, 379, 393-94 modern economics and, 377-79 modern portfolio theory (MPT) and,

62-64, 374, 375, 395, 399, 404 performance and, 35-36, 382-85, 374,

394, 446n probabilities and, 36-37 as progress, 373-74 rationality and, 375-79, 384 reliability of, 22-23, 30, 35-37 risk and, 1459, 151, 153, 297-303,

382, 383, 384, 395, 396 "semi-strong form" of, 59-61,

383-84, 385, 386 small capitalization stocks and, 317,

318, 322, 396

statistical analysis of, 34, 35, 61-62, 374, 379, 380-83. 384, 392, 394

"strong form" of, 61

volatility and, 380-81

"weak form" of, 61 Einstein, Albert, 71, 146, 377 Electric Boat Company, 319-20 EH Lilly & Co., 176-77, 186 Elliot, George, 69 energy industry, 265, 363 entrepreneurs, 114-15 equity funds, 57, 58 errors, investment, 214-37

anchoring in, 233-34

case rate vs. base rate in, 225-26, 229-30, 232-33, 236, 237

cognitive biases in, 19, 21, 216-37, 348, 372

decision-making and, 19, 38, 214-15,

216,218, 234-35,344 false analogies in, 216-21 hindsight bias in, 234, 269, 341, 343 inputs vs. outputs in, 230-40, 439n judgment and, 215-16 law of small numbers in, 221-24, 235 logical fallacies in, 214-15 market fashions and, 234-35 probabilities and, 215-16, 218-19,

222, 224-26, 232, 236 rationalism vs., 214 recent and salient events and, 231-33,

regression to the mean in, 227-30,

235, 439n representativeness heuristic in,

216-21,222 mles for, 221, 224, 229-30, 231,

236-37 simplification in, 215-16 statistical, 215-16, 222-23, 227, 228 variables in, 218-19 Evans Products, 321 event triggers, 130-34, 135, 247, 261 experts, 67-73

see also analysts, financial Extraordinary Popular Delusions and the Madness of Crowds (Mackay). 354-55 Exxon, 91,349

Fama, Eugene, 46, 61, 62, 151, 132, 300-301, 317, 327, 376, 381, 383. 385, 386, 390

Farrell, Robert, 56

Federal Accounting Standards Board (FASB), 50

Federal Home Loan Mortgage Corporation (Freddy Mac), 268

Federal National Mortgage Association (Fannie Mae), 118, 268

Federal Reserve Bank, 73, 223, 287, 378

Festinger, Leon, 358, 361 Financial Analysts Journal, 91, 147n, 150

Financial Statement Analysis (Fridson), 171/J

financial statements, 171, 244

financing, interim, 351-52

First Call, 90, 403

First Chicago, 267

First Chicago NBD, 277-78

First Fidelity Bank, 269, 276

Fischhoff, Baruch, 109

Fisher, Irving, 284, 292

Fisher, Lawrence, 386

Fleet Financial, 183, 184, 186

Florida Land Bubble, 353, 355

Forbes, 147, 150, 156, 174, 179-80,204,

217, 219, 262, 322n, 328, 329, 341,

342, 364, 396 Forbes Annual Mutual Funds Survey,

156, 342 Ford, Henry, 74

Ford Motor Company, 71, 74, 178-81, 186

forecasts, 67-87

charts in, 42-43. 45, 84, 217 comparative, 110-11, 113 consensus, 91-93, 94, 97, 100, 119-20 contrarian strategy vs., 139, 140-41 decision-making based on, 74, 79-80,

84, 113, 115-16 distribution of, 94-95 of eamings, 23, 52, 53-56, 76, 77-79,

87, 88,90-102, 108-9, 111-14,

115,298

earnings surprises and, 90, 94, 97, 112, 117, 118, 119-20, 125, 127, 128-29, 135, 136, 139, 140-41, 391-92, 432n

of economic activity, 72, 76, 79, 97, 101, 104, 223-24

in expansions vs. recessions, 96, 97-99

historical, 68-73

"illusion of validity" in, 109

inaccuracy of, 16, 23, 40-41, 67-68, 74-75, 78-79, 81-82, 84-87, 91-102, 104, 108-9, 111, 114-19, 124, 135, 147, 375

industry, 194, 199

information processing for, 74, 75-84 inherent difficulty of, 73-74, 115-16, 159, 172

inside vs. outside view of, 109-11, 113

long-term, 91-93

overconfidence and, 81-83, 114-16

past record of, 99-100

probabilities and, 80-81, 82, 111-14

quarteriy, 91-92

revision of, 90, 98

rules for, 96, 102, 124, 136

timing and, 240-41 foreign markets, 205-10, 213, 239 Forsyth, Frederick, 69 Fortune, 61, 153, 300, 318, 319, 320, 322 Francis, Jennifer, 98 Franco-Prussian War, 238 Frank Russell, 153 fraud, 334-37, 342-43 French, Kenneth, 152-53, 300-301, 376 Fridson, Martin S., 171n Friedman, Milton, 375 Full Employment Act (1946), 289 fundamental analysis, 48-56, 57, 59, 61, 74, 150, 170-71,371,373,397

Gable, Clark, 69

Galbraith, John Kenneth, 241

Galen Health Care, 174-75, 186

Galileo Galilei, 396

Galton, Francis, 227

gambling stocks, 340, 369n

Garzarelli, Elaine, 56, 221-22

Gates, Bill, 54

Genentech, 362

General Dynamics, 319

General Electric (GE), 181

General Motors (GM), 180, 349, 403

Gennany, 206-7, 210, 293, 315, 319-20

Germany Fund, 210

Gintel, Robert M., 335

Girsky, Stephen, 89

Glaxo, 194

glossary, 411-19

gold, 242, 247, 280-83, 288, 291, 294

Goldsmith, Barry R., 336

Goldsmith, Frederick N., 45

Gone With the Wind, 69

Graham, Benjamin, 49-56, 144-45, 156,

157, 163, 172, 183, 231,244,256,

295, 298, 305-6 Granger, Clive, 46 Granville, Joseph, 41, 45 Great Bull Market, 15, 49, 228 Great Crash-1929, The (Galbraith), 241

Great Depression, 49, 71-72, 216-19, 234, 239, 243, 262, 284, 288, 305 , 319, 324, 329, 354

Greenspan, Alan, 73, 223

gross domestic product (GDP), 31, 223, 289-90

gross national product (GNP), 72 growth analysis, 49, 53-55, 57-59, 101, 145

Growth at a Reasonable Price (GARP),

177, 178, 245, 246 Grubman, Jack, 89-90 Gulf War, 117, 181. 219-20, 262, 263,

264-65, 289

Halligan, Ted, 342, 343 Hambrecht & Quist, 364, 367 handicappers, 80-81, 82 Harvard Economic Society, 71-72 Hastings, Reed, 366-67 Hayes, Rutherford ., 71 health-care industry, 20, 174-75, 178,

231,365 health management organizations

(HMOs), 174-75, 231,365 Herzog, Heine & Gedult, 337 Hewlett-Packard, 78, 245, 246 Hickman report, 243 "Higgledy Piggledy Growth" (Little),

hindsight bias, 234, 269, 341, 343

Hoffman, Donna, 367

Holly, Buddy, 70

Hopkins, Sheila v., 287

horse racing, 80-81, 82

"how to" investment books, 186-87

Hulbert Financial Digest, 45, 222

Hulbert Service, 41

Humana, 174

Huxley, Thomas, 327

Ibbotson, Roger, 228, 317, 325-27 I/B/E/S, 90, 98

IBM, 54-55, 220, 279, 340, 368

indexes, stock, 63n, 3391

index funds, 63, 193,198-99, 204-5, 209

Industrial Revolution, 29

industries, 193-213

in bear markets, 200-201

"best" vs. "worst" stocks in, 193, 194, 196,200

in bull markets, 202

buy-and-hold strategy for, 196,197, 201-2

capital appreciation and, 195, 196 commissions and, 196

contrarian strategy for, 193-213 dividends for, 194-203 earnings by, 95-96, 100, 101,

199-200 export of, 289

financial information on, 202-3 forecasts for, 194, 199 in foreign markets, 205-10 investor psychology and, 193, 199,

200, 203,210,213 low P/E strategy for, 193, 194-203,

211-13

market performance for, 158,193,

198, 200-201,202,203 portfolios for, 170,196, 197, 199-202,

price-to-book value ratio (P/BV) for,

194-203,211 price-to-cash flow ratio (P/CF) for,

194-203 price-to-dividend ratio (P/D) for,

194-203 rules for, 197,211 sell targets in, 210-13 transaction costs and, 196 inflation:

bonds and, 273-74, 280-90, 291, 292,

294, 295, 304, 305-15 classic, 287-88 deficits and, 288-89 hyper-, 279, 292-94, 315 interest rates and, 56 rate of, 53, 72, 241, 287-89, 292-94 real estate and, 351 retums and, 280-90, 291, 292, 295 risk and, 297, 305-15 stocks and, 280-90, 291, 292-94, 295,

304, 305-15 information:

complexity of, 79-84, 87, 91-92,

107-8, 111, 113, 116, 381-82,

385-94

configural processing of, 76-77, 107

decision-making and, 76-77

forecasts and, 74, 75-84

incremental, 79-80

long-term, 222, 226, 228-30, 232-33

revolution in, 29, 91

sequential processing of, 76, 77

simplification of, 215-16

unreliable, 225-26 initial public offerings (IPOs), 20, 93, 118,158, 209, 226, 239, 326-27, 332-33, 342, 362-72, 385 Institutional Investor, 53, 88-89, 105, 234-35