Home | Log in | Join Now! | Blog | Contact    Subscribe to the InvestEd Forum feed (new threads) via RSS
InvestEd :: Wealth Education for Australian Investors


What If Sir Isaac Newton Had Been A Trendfollower?

LinkBack Thread Tools
Old 10-09-2011, 04:36 PM   #1
Posts: 3,385
Join Date: Aug 2005
Location: NSW
What If Sir Isaac Newton Had Been A Trendfollower?

Learning to Love Investment Bubbles: What if Sir Isaac Newton had been a Trendfollower? by Mebane T. Faber :: SSRN

In this research piece we take a look at some of the more famous market bubbles in history and the extreme volatility and drawdowns they experienced.
We then examine a simple trendfollowing approach investors could use to manage their risk.
Across twelve market bubbles we find that a trendfollowing system would have improved return while reducing volatility.
Most importantly, it would have reduced drawdowns significantly leading to the most important rule in all of investing – surviving to invest another day.
“I can calculate the motion of heavenly bodies but not the madness of people.”

To answer the question posed in the title of this article…..he wouldn't of got his arse kicked so badly if he had been a trend follower.
The quote above is from from Sir Isaac Newton after his fateful second foray into the South Sea Bubble of 1720. (The South Sea Bubble was the 1700s equivalent to our modern day technology crash/GFC).
It cost him some ₤20,000, which is a staggering sum, when you consider that the Nelson flagship HMS Victory cost around ₤68,000 to build.
Chris T.
Tropo is offline  
Digg this Post!Add Post to del.icio.usBookmark Post in TechnoratiFurl this Post!
Reply With Quote

Thread Tools

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are On
Pingbacks are On
Refbacks are Off

Similar Threads
Thread Thread Starter Forum Replies Last Post
Macquarie Newton and Asia Funds crc_error Managed Funds 30 06-05-2007 05:20 PM

All times are GMT +10. The time now is 10:54 AM.

Copyright © 2006 Investor Education Pty Ltd (ACN 114 677 226)
Site by Hampel Group