Zweig on the “Optimism Bias”

On the Wall Street Journal’s “Total Return” blog, Jason  Zweig highlights research that indicates human beings have an “optimism bias” — that is, we learn more from our successes than we do from our failures. And that, he says, has major implications for investors. Zweig says a new study, performed by a team of neuroscientists in London and Berlin found that “in short, humans don’t learn equally well from upside and downside mistakes.” Instead, “we pay… Read More

The Not-So-New Macro Investing World

For investors, much of the decade since the September 11 attacks seems to have been dominated by an unprecedented slew of troubling macroeconomic issues: terrorism fears, a financial crisis, natural disasters like Hurricane Katrina and the earthquake and tsunami that rocked Japan, to name a few. But such macro events are nothing new, The Wall Street Journal’s Jason Zweig says — and disciplined investors can profit from the perception that they are. “Sept. 11 and… Read More

Zweig: Market Is Cheaper — But Not Cheap

The recent downturn in the stock market has made stocks significantly cheaper than they were before — but they’re not yet “cheap”, according to The Wall Street Journal’s Jason Zweig. “Consider the [valuation] measure preferred by the great investment analyst Benjamin Graham and refined by Yale University economist Robert Shiller, called the ‘cyclically adjusted’ P/E ratio,” writes Zweig. “It smoothes out the market’s temporary peaks and valleys by averaging the past 10 years of earnings… Read More

Don’t Forget The Dividends — And Inflation

Investors may spend a lot of time fretting over whether their portfolios are going up or down. But, despite all of the advances in stock market data availability, many may not be getting an accurate picture of what their portfolios are really doing, says The Wall Street Journal’s Jason Zweig. According to Zweig, after last Friday’s decline, the Dow Jones Industrial Average was 11% below its 2007 high; the S&P 500 was 14% off its… Read More

Dividends and “Corporate Scrooges”: WWBGD (What Would Ben Graham Do)?

While U.S. companies have been raking in big profits since the end of the Great Recession, much of those profits are staying locked up on corporate balance sheets. And, in a recent column, The Wall Street Journal’s Jason Zweig takes a look at why that’s happening, and what he thinks the great Benjamin Graham would say about such tactics. “To be sure, at many companies the cash piling up is at global operations that generate… Read More

Battling Your Brain: How Loss Aversion Hurts Investors

Human beings are prone to a variety of behaviors that make them bad investors, and in an article for The Economic Times, Vivek Kaul looks at a major one: “loss aversion”. First identified and named by psychologists Daniel Kahneman and Amos Tversky, loss aversion is a phenomenon in which “people tend to base their decisions on perceived gains rather than perceived losses because the emotional impact of losses is far greater than that of gains,”… Read More

Why Corporate Cash Isn’t Helping Investors

Investors have been hearing for some time now about the hordes of cash being stashed on U.S. corporate balance sheets. In a recent column, The Wall Street Journal’s Jason Zweig explains a big part of why the cash stockpiles are so high — and why that cash might not be benefiting investors anytime soon. “U.S. companies are taxed at up to 35% when they bring home the earnings generated through the operations of their overseas… Read More

Zweig on Cloudy Forecasts

While scores of analysts and strategists have been offering their 2011 forecasts about how much the S&P 500 will gain or lose, how much gross domestic product will grow or shrink, and a myriad of other financial figures, The Wall Street Journal’s Jason Zweig offers a prediction of his own: Most of those forecasts, he says, will miss the mark, if history is any guide. “Why do people with years of experience, massive expertise and… Read More

The Pros Keep Buying High and Selling Low

The Wall Street Journal’s Jason Zweig says many money managers are failing to use a fairly simple tactic — portfolio rebalancing — that could be costing clients a good deal of money. “Investment professionals are supposed to exercise independent judgment; in Warren Buffett’s words, they should be fearful when others are greedy and be greedy only when others are fearful,” Zweig writes. “It doesn’t always work that way. Corporate pension funds had 69% of their… Read More

Why Following the Herd Is Like Sex and Candy for Investors

Why do investors tend to move in herds, buying when others buy and selling when others sell? According to a new study, it’s because of biology. The study, detailed by The Wall Street Journal’s Jason Zweig in his latest column, was performed by researchers from University College London and Denmark’s Aarhus University and published in Current Biology. In it, participants were asked to list songs that they most wanted to buy online. They were then… Read More