http://www.nytimes.com/2008/04/06/business/yourmoney/06stra.html?_r=1&ref=business&oref=slogin briefly sector (industry) picking is more valuable than stock selection within the industry and better industry pickers perform better in the long run. Very interesting research indeed. Which one do you think is more important??
Interesting article…
I was in an interview where the interviewer said that “research suggests that there is very little value added in picking sectors, compared to individual securities.” I always thought that was strange, and the only real reason I could think of is that there are a lot more individual securities to choose from than sectors, so maybe the breadth allows more leverage to create value (that fundamental law of active management thing from Grinold and Kahn (sp?)). Looking forward to reading the article in a few minutes.
Hmmm…if you are great at picking sector, then, what is the need to pick stocks within the sector?
ws Wrote: ------------------------------------------------------- > Hmmm…if you are great at picking sector, then, > what is the need to pick stocks within the sector? i was thinking about the exact same question, maybe it’s about education. Mauboussin talks about the diversity; more diverse people (investors) are more successful in solving problems and analyzing issues. I’m just thinking. But I liked the methodology of finding whether a manager is a good sector picker (replacing individual stocks with the index for the industry and comparing it with the market returns)