Why can’t people do a better job predicting the stock market? It isn’t just ordinary folks like you and me that have problems. Even the experts get it wrong about as often as they get it right. How hard can this be?
It turns out to be very hard. We don’t have a reliable way to predict stock prices — and we never will. The reason can be found in something I call the prediction paradox. (more…)
People who buy and sell stocks are aware of the brokerage commission they pay on those transactions. Many of them aren’t aware of another cost — a hidden one — called the spread. The spread can be insignificantly small, but it doesn’t have to be. This is one of the reasons frequent trading tends to produce inferior results. (more…)
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