Key
points:
A
good starting point when thinking about investment markets is the concept that
they are "efficient" as espoused by Eugene Fama.
But as Robert Shiller
and others have shown, the efficient market hypothesis often does not apply in
reality as shares are more volatile than can be justified and tend to move in
mean reverting cycles.
Combining the work of Fama and Shiller suggests
that there is a strong case to invest in indexed funds in highly analysed share
markets, eg. US shares, but importantly there is also a strong case for dynamic
asset allocation.
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