I recently engaged in a good back-and-forth with the owner of the Monevator blog both on substantive and procedural matters relating to my effort to open the internet to honest posting on the flaws of the Passive Investing model and to replace that model with the Rational Model of understanding how stock investing works.
Juicy Excerpt #1: We don’t need to simulate brain chemistry to build a Behavorial Finance model. The human emotions evidence themselves in a quantifiable way in both over-valuation and under-valuation. All that we need to do to correct the calculations done under the Passive model for the effect of the human emotions ignored in that model is to factor in the effect of valuations.
Juicy Excerpt #2: Behavioural finance doesn’t offer the comfort of anything that can really be modelled – there are too many different biases, many of which compete, for a start.
Juicy Excerpt #3: If Rational Investing is a “system” aiming at “beating the market,” then Passive Investing is a “system” aimed at beating common sense.
Juicy Excerpt #4: It is not true that there is a conspiracy being pushed by passive investing advocates, or that it crowds out other forms of investing…. It’s not my fight.
Juicy Excerpt #5: There have been millions and millions of words devoted to spreading the Passive Investing gospel over the past 30 years. People are not going to forget all the wonderful slogans (timing doesn’t work, stocks for the long run, etc.) if you don’t jump in and “correct” any comments that happen to be posted that question these “truths.” Just let it go. Just stop worrying about it so much.