QUESTIONS

  1. In what ways is the stock market a complex system?
  2. Is the stock market segmented or integrated?
  3. What advantages does a complex, unified approach offer?
    1. What is “disentangling”?
    2. What advantages does disentangling offer over simpler, univariate analysis of return-related variables?
    3. Give an example of disentangling at work.
  5. Why is it important to have portfolio construction and performance measurement processes that are congruent with the stock selection process?
  6. How do the breadth of coverage and depth of analysis provided by a complex, unified approach improve the likelihood of successful investment results?

1 See Heinz R. Pagels, The Dreams of Reason: The Computer and the Rise of the Sciences of Complexity (New York: Simon & Schuster, 1988); and Stephen Wolfram, A New Kind of Science (Champaign, IL: Wolfram Media Inc., 2002).

2 See Bruce I. Jacobs and Kenneth N. Levy, “The Complexity of the Stock Market,” Journal of Portfolio Management 16, no. 1 (1989): 19–27.

3 See Bruce I. Jacobs and Kenneth N. Levy, “The Law of One Alpha,” Journal of Portfolio Management 21, no. 4 (1995): 78–79.

4 See Bruce I. Jacobs, Kenneth N. Levy, and Mitchell C. Krask, “Earnings Estimates, Predictor Specification, and Measurement Error,” Journal of Investing 6, no. 2 (1997): 29–46.

5 See Bruce I. Jacobs and Kenneth N. Levy, “Disentangling Equity Return Regularities: New Insights and Investment Opportunities,” Financial Analysts Journal 44, no. 3 (1988): 18–44.

6 See Bruce I. Jacobs and Kenneth N. Levy, “Calendar Anomalies: Abnormal Returns at Calendar Turning Points,” Financial Analysts Journal 44, no. 6 (1988): 28–39.

7 See Bruce I. Jacobs and Kenneth N. Levy, “Forecasting the Size Effect,” Financial Analysts Journal 45, no. 3 (1989): 38–54.

8 See Bruce I. Jacobs and Kenneth N. Levy, “High-Definition Style Rotation,” Journal of Investing 6, no. 1 (1996): 14–23.

9 See Bruce I. Jacobs and Kenneth N. Levy, “Long/Short Equity Investing,” Journal of Portfolio Management 20, no. 1 (1993): 52–63.

10 See Richard C. Grinold, “The Fundamental Law of Active Management,” Journal of Portfolio Management 15, no. 3 (1989): 30–37.

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