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MICHIGAN TECH APPLIED PORTFOLIO MANAGEMENT PROGRAM |
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THE SECRETS OF WARREN BUFFETT (AND OTHER GREAT MONEY MANAGERS) By: Joseph R. Dancy, J.D., MBA, Michigan Tech Fund Trustee
Living quiet, unpretentious lives Mr. and Mrs. Othmer – he was a professor of chemical engineering at Polytechnic University in Brooklyn and she was a former grade school teacher - died in the late 1990’s. They had no children. When the Othmer's died, friends were shocked to learn that their estate was worth $800 million! How did these two teachers get so wealthy?
We discuss the Othmer’s investment success—and how applied financial theory should allow APMP students to construct a portfolio that will substantially outperform all the major market indexes—in a lecture given to MTU finance students in early 2003.
In short, we discuss tools that might be used to make APMP students so inclined the “next Warren Buffett.” **********************************
IN SEARCH OF THE MOTHER LODE: PROSPECTING FOR OUTSTANDING INVESTMENT RETURNS By: Joseph R. Dancy, J.D., MBA, Michigan Tech Fund Trustee
Dr. Eugene Fama, a professor at the University of Chicago and Nobel Prize recipient, coined the term "efficient market hypothesis" to describe how market prices fully reflect all available information on a publicly traded company. Under this theory it is impossible to beat the market over the longer term (absent illegal insider information) since market prices effectively reflect all information that may impact a company and its share price.
But Fama's theory does not mean that a portfolio cannot outperform the market. Professor Fama, with Professor Kenneth French of Yale University, undertook a statistically rigorous study of the major factors that can be used to predict the returns of a portfolio. Their goal was to quantify the factors that have the most positive influence on a portfolio.
We discuss Fama’s efficient market theory —and his “ Three Factor Theory” - revealing what quantitative factors influence the performance of an equity portfolio in a lecture to Michigan Tech APMP students.
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