by Vijay Singal
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Product Description
In an efficient market, all stocks should be valued at a price that is consistent with available information. But as financial expert Vijay Singal, Ph.D., CFA, points out, there are circumstances under which certain stocks sell at a price higher or lower than the right price. In Beyond the Random Walk, Singal discusses ten such anomalous prices and shows how investors might--or might not--be able to exploit these situations for profit.
The author distills several decades of academic research into a focused discussion of market anomalies that is both accessible and useful to people with varied backgrounds. Past empirical evidence is supplemented with author's own research using more recent data. Anomalies covered include the "December Effect," "Momentum in Industry Stocks," "S&P 500 Index Changes," "Trading by Insiders," and "Merger Arbitrage." In each chapter, the author describes the particular anomaly, explains how it occurs, shows ways to take advantage of the anomaly, and highlights the risks involved. We learn, for example, that shares of stocks that have appreciated in recent months become scarce in late December, because investors wait until January before they sell (to postpone payment of taxes on profits). This scarcity drives the price up--the "December Effect"--and smart buyers can make the equivalent of 75% annual return on a five-day investment. Each chapter includes suggestions for further reading as well as tables and graphs that support the discussion. The book concludes with a preview of many other interesting anomalies and a section on how investor behavior might influence prices.
Clearly written and informative, this well-researched volume is a must read for investors, traders, market specialists, and students of financial markets.
Average Customer Review:
1 of 1 people found the following review helpful:
 academic AND accessible, 2006-01-11
I'm impressed with what a good job Vijay Singal has done. Beyond the Random Walk is very clear and thorough, turning what is normally overly academic research/text into easy to follow prose and investor-friendly instructions. I'm reading a library copy now, but want to have my own copy--a rarity for me.
1 of 1 people found the following review helpful:
An excellent invesment, 2005-06-11
Vijay has written a very lucid account of different pricing anomalies and how to take advantage of them. His section on momentum-trading strategies was particulary interesting to me. Sector-fund momentum trading strategies have been shown to beat the market averages ( Hulbert's Financial Digest has reviewed sector fund newletters and thinks there's statistical evidence of superiority in their total returns versus an unmanaged index). It's well worth considering as an investor if you're willing to invest a little time. I've based a website on this approach, topsectors.com, so I'm quite convinced it's a strategy that hasn't been fully exploited today and so pricing anomalies exist that the average investor can use to their advantage.
3 of 3 people found the following review helpful:
A really useful book for practitioners, 2004-11-13
I am a (successful) practitioner who has been exploiting mispricings in the market for more than 10 years - in bad times and good times.
This is an excellent book - readable, comprehensive, and up to date. It is not a fool's book but the ideal book for an intelligent person. It describes the risks associated with each strategy. I particularly like the strategy with Fidelity Select Funds.
I hope the book becomes popular so that it can be reissued every few years with new insights and new data.
4 of 4 people found the following review helpful:
Well-written, convincing....if you are a trader..., 2004-07-28
This is definetly one of the better written books on the subject. Singal presents several "market anomalies" and discusses strategies as to how to benefit from them. However, most of them have holding periods of a couple of days to a few weeks at the most. A long-term investor may not find the strategies mentioned here very useful. Of particular appeal to mid-to-long term investors may be the discussion on SP500 additions and deletions, and mutual fund pricing. It may offer some tips on when to committ additional funds to mutual funds. However, the increased pressure on market timers and related activities, increasing redemption fees, trading costs, tax implications and the sheer amount of time required to monitor the strategies, the techniques of the author provide for good academic discussion and not as much as practical "tips". Nevertheless, the market situations, suggested techniques, evidence and possible explanations, citations are well presented and logically organized. A must-read for traders and investors alike, though for different reasons.
14 of 27 people found the following review helpful:
 Beyond the random walk, the path is rocky., 2004-06-03
This is a very interesting and clearly written book. From an academic standpoint, it effectively digs some dent in the Efficient Market Hypothesis. The author addresses ten classic situations, some of them well known, when markets are not efficient.However, the author does not make a convincing case that retail investors can exploit these inefficiencies efficiently. In other words, the anomalies the author depicts amount to separate trading strategies which should potentially help you achieve the "buy low - sell high" optimum. However, these trading strategies are associated with much higher transaction costs and taxes than a buy-and-hold strategy of an index fund. Additionally, some of these strategies are very labor intensive and information intensive. These are added costs. Finally, these strategies will cause you to cash out of the market frequently. The holding of cash balances will further reduce your return compared to investors who remain fully invested. When all is said and done, will you come out ahead exploiting these market anomalies after you factor all added costs? The author stated that he "generally" does come out ahead of the market. However, he does not support this vague statement with any documentation. Also, he adds that going forward his strategies may be less effective because of ever changing market conditions. Thus, once a market anomaly is exploited by a few investors, the market's ever evolving efficiency erases this anomaly. Although the book is very interesting, it is no substitute to sound investment strategies based on the Efficient Market Hypothesis. It is a far safer and easier to profit from the market's overall efficiency than to attempt to profit from its few and fleeting marginal inefficiencies. If you are interested in this subject, I strongly recommend the classics by Burton Malkiel: "A Random Walk Down Wall Street" and "The Random Guide to Investing." I also strongly recommend John Paulos excellent "A Mathematician Plays the Stock Market." These books all suggest that you are better off focusing your energy on proper asset class diversification that reflects your risk tolerance. And, in turn invest for the long term through index funds of these respective asset classes.
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