A recent study by three researchersfound that it has been possible to achieve investment results similar to Warren Buffetts market-beating returns by simply following his trades as disclosed in 13F filings. The same is true, they found, of other top-performing investment managers.
The authors thought this result was anomalous because, according to the efficient market theory, one would expect market participants would immediately react to the 13F filings and quickly drive up prices to reflect their information content. But this discounting does not occur, sopiggybacking on the publicly revealed positions of top investors seems to work.
At least for the 1980 to 2006 period covered by the study. But now that this study shines a spotlight on this market inefficiency, it makes market participants more aware of the opportunity and, in turn, increases the likelihood it will be more quickly dissipated in the future.
The Buffett Copycat ETFs here we come? Still, the studys findings do make one wonder if the market isall that efficient. Perhaps other, less well-know “under-reactions” are still out there in the market for active investors to exploit.
Blogs & Comment
Ride Buffett’s coattails?
By Larry MacDonald
A recent study by three researchersfound that it has been possible to achieve investment results similar to Warren Buffetts market-beating returns by simply following his trades as disclosed in 13F filings. The same is true, they found, of other top-performing investment managers.
The authors thought this result was anomalous because, according to the efficient market theory, one would expect market participants would immediately react to the 13F filings and quickly drive up prices to reflect their information content. But this discounting does not occur, sopiggybacking on the publicly revealed positions of top investors seems to work.
At least for the 1980 to 2006 period covered by the study. But now that this study shines a spotlight on this market inefficiency, it makes market participants more aware of the opportunity and, in turn, increases the likelihood it will be more quickly dissipated in the future.
The Buffett Copycat ETFs here we come? Still, the studys findings do make one wonder if the market isall that efficient. Perhaps other, less well-know “under-reactions” are still out there in the market for active investors to exploit.