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What Works on Wall Street: A Guide to the Best-Performing Investment Strategies of All Time, by James P. O'Shaughnessy
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"The best investment book of 1996. Very likely, it will be the most influential book on investing in this decade."Stock Traders Almanac
"...O'Shaughnessy's conclusion that some strategies do produce consistently strong results while others underperform could shake up the investment business."Barron's
The New York Times and Business Week bestseller, What Works on Wall Street is now updated throughout to include the new data and 50 new sample portfolios. Hailed as "a great book" by Forbes, What Works on Wall Street is a must read for any investor looking to make savvy, historically informed decisions.
- Sales Rank: #1282974 in Books
- Published on: 1998-05-31
- Original language: English
- Number of items: 1
- Dimensions: 9.30" h x 1.40" w x 7.60" l,
- Binding: Hardcover
- 325 pages
Amazon.com Review
Investors -- be they aggressive or conservative, self-directed or professionally managed -- are always on the lookout for an edge. And in James O'Shaughnessy's What Works on Wall Street: A Guide to the Best-Performing Investment Strategies of All Time, they'll find a solid one: authoritative analysis of popular practices from the past. The author examines three decades of stock market data to show how 15 of the most common investment tactics have fared over time.
Review
``. . .analysts praised his stock-picking strategy, explained in his well-received book. In it, he digs into more than 40 years of data to find out what strategies would have picked the winning stocks.'' (The Wall Street Journal 1997-09-15)
From the Author
What Works on Wall Street was probably the most anticipated investment book of 1996. James O'Shaughnessy gained unprecedented access to Standard & Poor's Compustat database and back-tested the returns generated by various clearly defined investment approaches over the past 40 years. The book challenges quite a bit of the conventional wisdom about portfolio management and is a compelling, although statistically flawed, work.
In What Works on Wall Street, O'Shaughnessy examines the performance of the highest and lowest price/earnings, price/sales, price/book value, relative strength, yield and earnings growth stocks over various periods, trying to find which types of companies tended to perform best. Although you can quibble with a lot of the data, the sheer magnitude of the task O'Shaughnessy has undertaken is impressive. His final, multifactor strategies that generated the best investments over time are very interesting, particularly the Cornerstone Value approach, which is very similar to the Dow Dividend Approach with a few other bells and whistles.
O'Shaughnessy's book and its findings should be read, discussed and disputed by all investors. However much one can criticize the work for being too focused on the plight of professional money managers looking to pick fifty stocks and not individual investors looking to pick five, the information is valuable and compelling. The only warning that I would give to readers is to be aware of a methodological error in the way O'Shaughnessy does the statistics. Because of the time required, O'Shaughnessy and his team looked at how the 50 highest or lowest stocks in any particular group performed. Extrapolating the performance of extreme data points to the entire set of data being studied is not entirely correct, as there are many processes in nature where the middle actually does not act like the extremes. Mass and velocity in physics are one example, where super-light and super-dense objects both do not obey the laws of physics, while everything in between does. With this caveat, I think an investor can learn a lot from the book.
Most helpful customer reviews
11 of 12 people found the following review helpful.
The best stock tactics of all time:with proof
By Steve Burns
This is the rare 5 star ***** book. It is no nonsense and gives you exactly what its title suggests. It shows what has really worked on Wall Street from 1951 to 1996 by using the Standard and Poors compustat data base to simulate what would have happened if an investor (or mutual fund) would have bought the top 50 stocks meeting the criteria measurement. Example: Highest P/E ratios, top 50 price increases, top 50 price decreases, best dividends, high or low book to price value, etc.He goes further by breaking the top 50 into only the large cap meeting this criteria and if he bought out of all stocks available. He measures stocks and their performance from almost every imaginable angle. It is fascinating and educational to see what the final dollar amount is for each investment approach. He also shows how each style performed in each decade and how each percentile of stock did in each category.(Example: how the top 5 stocks did with low P/E's versus the bottom 5 in the top 50 stock group, this helps the individual stock investor focus his investments).
Here are the books big findings. If you took $10,000 and invested it in 1951 and invested it in the following top 50 stocks that met the following criteria, while resetting it every year to match your criteria, in 1996 you would have had:
Top 3 ways to invest
PSR5,High relative strength,All stocks $12,570,451
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