Michael Mauboussin: 15 Ways To Identify Market InefficienciesThe Acquirer's Multiple
Michael Mauboussin has just released his latest paper titled – Who Is On The Other Side?. In the paper Mauboussin describes a number of inefficiencies that exist in the market, driven mainly by the optimism or pessimism of human beings. Included in the paper is Mauboussin’s Checklist for Identifying 15 Market Inefficiencies:
- Are investors overextrapolating from recent results, leading to unrealistic expectations?
- Is there evidence of performance chasing in a security, sector, or asset class?
- Do sentiment indicators suggest extreme fear or greed?
- Do investors have correlated views that create fragility in the market?
- Do you have a different time horizon, allowing you to take advantage of time arbitrage?
- Are you more analytically skillful than the other investors you are competing with?
- Are you placing different, and more precise, weights on information?
- Are you accurately updating your views based on new information?
- Do you have reason to believe that the story about a security will change?
- Do you understand a complex investment opportunity better than others?
- Have you legally acquired information that other investors don’t have?
- Are you paying attention to all relevant information?
- Are you trading with forced buyers or sellers?
- Can you take the other side of fund flows?
- Can you step in when arbitrageurs are tapped out?
You can read Michael Mauboussin’s latest paper here – Michael Mauboussin – Who Is On The Other Side?
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Article by The Acquirer’s Multiple