O’Shaughnessy would then recycle this strategy every year, buying again the top 50 in terms of shareholder yield. Posted on 17 November 2007 12 February 2011 by David Merkel.

I recently finished a book entitled What Works on Wall Street by James P. O’Shaughnessy.. If you don’t trade often, avoid momentum. The information on This book was really popular in 1996, when it was published. I can’t tell which one will work the best.) However, the minimum he recommends is 25.

Had he been able to analyze a full cycle that included the Great Depression, he might have come to different conclusions.

My first problem is the title of the book.

Combining growth and value strategies produced the best risk-adjusted returns.

The one that works the best just happens to be the victor of a large data-mining exercise.

WHAT WORKS ON WALL STREET A Guide to the Best-Performing Investment Strategies of All Time JAMES P. O’SHAUGHNESSY Third Edition McGraw-Hill New York Chicago San Francisco Lisbon London Madrid Mexico City Milan New Delhi San Juan Seoul Singapore Sydney Toronto. However, the minimum and maximum for the Cornerstone Value approach was -15.00% and 58.20%. Who would benefit from this book: Most investors would benefit from this book, if they are careful not to grab for the “brass ring” and imitate the strategy that has worked best in the past. Avoiding risk pays off in the long run, for the most part. He did try to be statistically fair, avoiding look-ahead bias, diversifiying into 50 stocks, avoiding small stocks, and rebalancing annually. They work best together. Registered Investment Advisor, bonds, Dividend Investing, ETF investing, Follow David Merkel, CFA and get email alerts.

Though, this strategy is more consistent than many of his other strategies and thus the reason I chose it for this writing.

The author only had access to data from a fairly bullish period. In the book What Works on Wall Street, O’Shaughnessy also shows the reciprocal, that greater risk does not always translate into greater return. I can’t tell which one will work the best.) It should have been titled “What Has Worked on Wall Street.” Many analyses of history suffer from the time period analyzed. In this book O’Shaughnessy explains the power of passive investing. David Merkel is an investment professional, and like every investment professional, he makes mistakes. This goes through the main factors that have worked also. Also, though David runs Aleph Investments, LLC, this blog is not a part of that business. There are several valuable things to learn from the book, which I will mention later; whether they justify purchase of the book is up to the reader. This goes through the main factors that have worked also. The amazing part about it was that these results were obtained with less risk using his approach. It is this sort of unwavering discipline that separates the successful investor from the unsuccessful. Now, two mutual funds based on his “cornerstone growth” and “cornerstone value” strategies have run since the publication of the book.

By focusing on a value metric like price- to- sales, for instance, investors are making sure they aren’t paying too much for the momentum.

Under no circumstances does any The minimum and maximum annual return for the S&P 500 was -26.47% and 55.62%, respectively.

This strategy had 42 positive and 9 negative periods, versus 38 and 13 for the S&P 500.

Sorry, your blog cannot share posts by email. While the S&P 500 had a Sharpe ratio (reward-to-variability) of 0.42, Cornerstone Value had a Sharpe ratio of 0.65. Full Disclosure: I get a small commission if you buy the book through this link to Amazon.

In this book O’Shaughnessy explains the power of passive investing. The Least Risky Strategy that Works on Wall Street, The Best Things in Life are Easy and Simple, non-utility stocks with greater than average market caps, shares outstanding, cashflows, and sales of 50% greater than the average stock (this includes ADRs). This blog exists to educate investors, and give something back. I recently finished a book entitled What Works on Wall Street by James P. O’Shaughnessy. Get on Amazon. In fact, O’Shaughnessy goes over several methods of passive investing which lower risk while increasing return, thus highlighting the fact that greater returns don’t always come with higher risk. If nothing else, one can maintain the strategy after bad years. Buy 50 stocks with the highest relative strength trading at a price-to- sales ratio less than 1, hold for a year, then repeat.

Past performance is a poor Helping Institutions and Ordinary People Invest Better by Focusing on Risk Control.

Additionally, David may occasionally write about accounting, actuarial, insurance, and tax topics, but nothing written here, at RealMoney, or anywhere else is meant to be formal "advice" in those areas. The growth and value strategies that did the best embedded a little value inside growth, and a little growth inside value.

Unlike most books I will review at my site, this one does not get wholehearted approval from me. The one that works the best just happens to be the victor of a large data-mining exercise. The growth and value strategies that did the best embedded a little value inside growth, and a little growth inside value.

Listen Free with a 30-day Audible Trial. To report a factual error in this article. James O’Shaughnessy gained access to the S&P Compustat database, and tested a wide variety of investment strategies to see which ones worked the best over a 43-year period. Significant Declines in the Stock Price (anti-momentum).

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