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The Large-Cap Portfolio, + Web site: Value Investing and the Hidden Opportunity in Big Company Stocks by Thomas Villalta

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CHAPTER 9

Approaching Growth in Large-Cap Stock Research

As I argued in Chapter 7, managers fail to beat market benchmarks because, ironically, they approach the stock market from the perspective of market efficiency theorists. They follow the constructs of the efficient markets hypothesis (EMH), striving to prove it wrong, as they seek to prove that technical analysis adds value or smart determined analysts can uncover information that others can’t uncover. But, as discussed in prior chapters, the EMH and theories of market efficiency do not fall apart because they aren’t logical, or because they don’t represent an ideal. They fall apart because of people’s behavior. They fall apart because people don’t behave in a manner that reflects many ...

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