What Works on Wall Street

This is a classic book with first edition was published as early as 1996. Right now, I am reading the 3rd edition and I am so fortunate that the 3rd edition covered much more compares to the previous edition. Obviously, the author did put a lot of effort in this book. Plenty of research was done and theories provided are supplied with tons of evidence and data. As mentioned by Aaron Brown in "Red-blooded Risk" ~~~ Bad data leads to inefficiency and uncontrollable risks. Even if it didn't, given the vast sums spent on processing data, it's worth spending a little effort to make it good. Thank god that James P. O' Shaughnessy does us a favour in this book... It saves us a lot of time to verify the said data.

One very interesting point... although the author seems to focus on value investing, but what he mentioned apply to all methods such as systematic mechanical system, trend following or any chosen technical analysis, etc. Read this: 

Most traditional managers' past records cannot predict future returns, because their behavior is inconsistent. 

When you study a traditionally managed fund, you're really looking at two things: first, the strategy used and second, the ability of the manager to implement it successfully. 

Strategies that demonstrate a consistent ability to outperform over the long-term tend to return to doing so just as everyone has lost faith in them. If a long-term strategy you are using has a few bad years; chances are, it is getting set to rebound. 

Models never vary. They are always consistent. People on the other hand, are far more interesting. We are a bundle of inconsistencies, and although making us interesting, it plays havoc with our ability to successfully invest our money. 

Many investors believe a five year track record is sufficient to judge a manager's abilities. But, like Alexander Pope's maxim that a little learning is a dangerous thing, too little time gives investors extremely misleading information.

Histories never repeats exactly, but the same type of events continue to occur. Investors who had taken to heart this essential message in the last speculative bubble were those least hurt in the aftermath.

If you torture the data long enough, they will confess to anything. If no sound theoretical, economic or intuitive common sense reason exists for the relationship, it's most likely a chance occurrence. 

The best way to confirm that the excess returns are genuine is to test them on different periods or subperiods or in different markets.

Overall, this is an excellent book although I hardly move into shares these days. The fact is, the author did so well in each edition to provide us the proof and evidences on what works on Wall Street. A friend of mine arguing that it is kind of boring and dull to gone through those numberings. After all, I think the numbering stuff take up at least 60% of the book contents. However, for those who love to study numbers like me; you will surely enjoy this book. As a result, I am going to rate 10/10. This book will remains on my shelf for a long time and I think chances quite high that I will revisit this book in the future... Thumbs up!