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Author: RayneMaker Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 3794  
Subject: EMH Date: 7/1/2011 9:49 AM
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I'm trying to learn as much as I can about investing and understanding accounting, instruments, markets, etc. so i am reading as much as I can. I'm really looking for a textbook with lots of examples and practice, but the textbooks I find place a lot of emphasis on the efficient market hypothesis. I am a fan and reader of Buffett and Graham and value investing so I don't really want to use the tools and principles taught in modern portfolio theory.

So the question I pose to value investors out there is: do you use any modern portfolio theory in your investing process? I'm really interested in getting the perspective of a value investor who got an MBA from a well known program because I read that MPT is given a lot of emphasis. I assume investors like Bill Ackman who got their MBA's from Harvard Business School would have received lots of exposure to MPT, yet he doesn't believe in it so far as I have read.

Another question: are there any textbooks that don't place emphasis on MPT and have a value orientation?


Thanks to anyone who takes the time to reply

-Ryan
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Author: jackcrow Big gold star, 5000 posts Feste Award Nominee! Old School Fool CAPS All Star Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 3773 of 3794
Subject: Re: EMH Date: 7/1/2011 11:00 AM
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Ryan,

The Columbia School of Business is pretty much the heirs to the Graham-Dodd methods of investing. Prof. Greenwaldt and Greenbladt are probably the most visible torch bearers. They do not adhere to MPT but understand that many in the market use it and its use effect on market prices.

Across town you find Dr. Damadoran http://pages.stern.nyu.edu/~adamodar/ who is one of the most generous profs you will ever run into. He teaches techniques that use MPT and its derivative theories and he is no fool he knows what MPT is, its strengths and weaknesses. His books "Damadoaran on Valuation" and "Valuation: Measuring the Value of Companies" are superb as is his web site. The second is full of examples and homework that you may find useful.

It certainly does not hurt to have a solid understanding of the commonly taught methods finance grad students are being taught. It provides a solid base for negotiating the investing universe from a value perspective and allows for intelligent divergence from the MPT approaches.

The real keys for non MPT approaches are finding a substitute for beta and intelligently side stepping the correlated/non-correlated asset issues. Both choices are shaped by education, experience and personality which shapes market views which in turn shapes personal investing systems and methods.

Personally I find no practical use in beta, MPT or EMH. I believe they singly or as a group do not effectively deal with market(s) and individual asset risks. I also try to respect that there is a large portion of fund managers that were trained to use those concepts in their methods.

I have no advance degree in finance, I'm just a part time investing hack.

does that help?

jack

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Author: dcharlotte Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 3774 of 3794
Subject: Re: EMH Date: 7/7/2011 12:04 AM
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I'll second jackcrow's advice on reading Damodoran's books and website. My value investing really came together after I found him. He should be better known to value investors. The more popular 'Investing' books hardly scratch the surface compared to him.

Another good source is Joe Ponzio's website: fwallstreet.com It's very readable, maybe start with that then go to Damodoran.

I keep a personal blog page that mentions a few other sources:

http://www.healthywealthywiseproject.com/Home/wealthy-blog/d...

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