BOOK REVIEW

"The Random Walk Guide to Investing, by Burton G. Malkiel"

"The Random Walk Guide to Investing, by Burton G. Malkiel"

Book Review

After a brilliant career began in 1973, A Walk through the random exchange of Professor Malkiel (Princeton University) facelift for its eighth edition (published in the U.S. in 2002), and the bursting of the Internet bubble brings one additional stone to his theory of random walk.

The main quality of Malkiel lies in his extraordinary talent to convey with great clarity the intricacies of the financial markets and to benefit the reader (even secular) of its triple experience investor, finance professor and author success.

To explain in a few words the difference between the key concepts of the theory of efficient markets that are as radical and moderate, Malkiel takes the story of the professor of finance and one of his students, leaving entire campus, fall on a $ 100 bill. "Professor, taking the radical approach Walk randomly while learnedly explained that his student should not waste time picking up the ticket, because if it were true, someone would pocketed long. Students - pretty skeptical, says Malkiel, not only on the skills of Wall Street, but also on teaching professor, picks. Continuants, thereby enhance the efficiency of markets. "

Of course, the style is lively, full of this distancing skeptical, elegant and fun have at times large U.S. university when observed from the luxurious calm of their campus follies "city" (the business). Use happy and finesse of understatement and euphemism (even though trading rooms are probably the best place for hyperbole) highlights the complicity with the reader, invited him as not to unduly impressed by the alchemy of finance.

There is still a hilarious analysis of major events in the history scholars, from the seventeenth to the Dutch tulip mania of the era escapades Net, with its surreal assessments.

In short, it will be understood that it is the least of the qualities of this book provide a particularly easy read, even for a novice. It's not anything, but it is not everything.

If this book is required in head structures essential funding to finance students, advisors and wealth management, not only for its style, it is primarily an investment guide that draws all the consequences of the Modern Portfolio Theory and its primary education: market efficiency.

The heart of the thesis of Professor Malkiel is simple: a monkey (or a professional fund manager, or even a finance professor) who chooses actions randomly throwing darts would do just as well (and often better) that a manager (well paid, but it is a tautology) which selects his titles carefully.

Important corollary, which enrages the professional community and the major banking groups and investment affecting considerable rents to manage money for individuals: the probability that a fund manager gets a higher return than the index is low (about 20%), and among those who beat the index over a year, half will be less next year. The rules of Malkiel are well-known and are discussed as follows:

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