Friday, May 09, 2008

Warren Buffet and Efficient Market Theory

Can Warren Buffet make money? Consistently?

Or is he like an ace fighter pilot?

(Nod to El Zorno, who can make money disappear)

2 comments:

br said...

I think the reason WB can beat the market is that he's more of Venture Capitalist than a trader. His research is 100x more thorough than the average trader, who can't afford teams of analysts, or to go visit every firm.
Then, he buys significant enough chunks of the firms so that he can influence their direction. ie. instead of buying one house in a bad neighborhood, he buys 10-20% of the neighborhood.

Dan in Euroland said...

I think br hits on some of the areas where Buffet generates his alpha.

That being said I still find David Hirshleifer's "Can individual Investors Beat the Market" convincing. Some people do have alpha.