Mutual funds in which the manager selects stocks based upon behavioral finance tenets.
Donnie firmly believes that, when investors are experiencing euphoria, they will bid up stock prices, while the opposite is true when they are feeling angst. To capitalize on this theory, he started a Twitter-based behavioral fund whereby he buys/sells stocks based on the general tone of 500 accounts he follows. Donnie's fund, like most behavioral funds, is underperforming the market, but that's way better than, say, trying to govern an entire nation using similar tactics.
Related or Semi-related Video
Finance: What is a Random Walk hypothesi...65 Views
Finance allah shmoop What is the random walk hypothesis The
market is unbeatable Trying to beat it by buying this
stock selling that one Good luck You're this guy you
get free real estate wherever you stop so well you
might end up here Yep Yukon gold Well you might
end up here yet but alligators swamp where Your lunch
But if you take enough random walks and even if
you find gold or ah silicon valley real estate well
eventually you'll end up here That's the random walk theory
Itjust claims that the market is unpredictable You can't beat
it pretty much Just like the efficient market theory They're
kissing cousins Well given that quite a few investors have
beaten the market over time And a few like this
guy have crushed it Well who could have come up
with such an idea And like when Well it'd be
the french of course in eighteen Sixty three This guy
julian you know well And over time a bunch of
other eggheads tried to mathematically prove that the market was
unbeatable And in fact what they proved is for average
talent people it probably is Their efforts largely revolved around
missing the notion that buying a concentrated portfolio of a
dozen or so for high quality companies and not buying
into crappy industries like airlines or paper And paul for
anything highly unionized made it a pretty decent bet that
an individual investor over long periods of time could in
fact beat the market And if you think about it
you got the s and p five hundred If you
could just get rid of the worst two or three
hundred bottom cos down there Well the top two hundred
probably do pretty well and you beat the market nicely
and get rich and you go get the by portia's
in your old age Yeah those investors Well those investors
who beat the market They're rich The professors with the
misguided not street smart math but who know a lot 00:01:59.663 --> [endTime] of vocabulary words Yet their professors
Up Next
What is program trading? Program trading refers to the use of computer algorithms to place and execute large volume, multiple buy and sell orders o...
Modern Portfolio Theory claims there's a smart way to invest. If it's not "put all your money under your mattress," we might be doing it wrong...
A quant fund is an investment fund, often featuring elements of hedging, that relies heavily on math. So... maybe stay awake in calculus. You might...