Set forth below is the text of a comment that I recently posted to the discussion thread for another blog entry at this site:
Yes, weez all justa buncha moooroooons and only Rob Bennett has all the right answers.
I think that it’s the last 41 years of peer-reviewed research in this field that has all the answers. Once we decide as a nation of people to permit honest discussion of that research at every discussion board and blog on the internet (I believe that that day will come after the next price crash shows us in an up-close and personal way what going pure Get Rich Quick/Buy-and-Hold always translates into in the long run), I believe that the first true research-based strategy will start spreading like wildfire.
We’ll see.
Rob
How many studies have you included in your study of the last 41 years of research?
Shiller published his Nobel-prize-winning research showing that valuations affect long-term returns in 1981. It has not been discredited in the 41 years since. Every year that passes in which it remains not discredited, our confidence in Shiller’s finding should increase.
In contrast, there has never been a single study showing that market timing doesn’t work. Academics put that forward as an hypothesis (“The Efficient Market Theory”). But no one ever tested the hypothesis to determine whether or not it is so until Shiller came along to discredit it. Some people say that Fama’s research supports the hypothesis. But Fama only tested short-term timing. There is indeed good reason to believe that short-term timing doesn’t work. But to say that no form of timing works just because one form of timing has been shown not to work is like saying that no form of driving works because one form (drunk driving) has been shown to be a bad idea.
Rob