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Summary: A Random Writing Regarding Wall Street
Review: "I believe the stock market is fundamentally logical." This quote by Burton Malkiel from his book A Random Walk Down Wall Street is the one of the main tenets of the Random Walk Theory. Randomaniacs (my pet name for those who boldly hold to the Random Walk theory) believe the market instantaneously, and efficiently, prices all known news into stock prices at all times, making it futile to search for exploitable stock market situations. Analyzing trends, economic conditions, interest rate levels, etc., is pointless. The market is so efficient one cannot find anomalies or trends that can offer market-beating performance without accepting loads of extra risk. Malkiel would also have you believe that 1. You cannot consistently outperform the market without increased risk 2. It is better to hold an index fund rather than individual stocks (unless the stocks are a true proxy for the index) Markets get irrational (but not inefficient) and attract unwary investors 3. The disciplines of fundamental and technical analysis are not effective analytical investment tools "...a blindfolded chimpanzee throwing darts at the Wall Street Journal can select a portfolio that performs as well as those managed by the experts." 4. The risk in most investments decreases with the length of time the investment can be held Being ex Wall Street, I have had a chance to make a living within our "efficient markets." My practical experiences have taught me that there are efficiencies, but the market itself is not efficient to the degree most think. While there seems little doubt that a certain amount of randomness or "noise" does exist in all markets, it is just unrealistic to believe that all price movement in random. How, for example, would a buy and hold strategy fare in the futures markets where timing is so critical? How would investors know the difference between bull and bear markets if prices are unpredictable and don't trend? In fact, how could a bear market even exist in the first place because that would imply a trend? Give these questions some thought: 1. Has the market been efficiently pricing Internet stocks (are they really worth that much)? 2. Why does the market have "curbs" or "circuit breakers" to temporarily cease trading when it has dropped too far? 3. If you buy a stock at $12 share, and it drops to $6 shortly thereafter, are you going to sell it when it gets back to $12 (come on, be honest!)? 4. If a large number of investors are technicians (use charts to determine entry and exit points from stocks), won't their analysis have a fundamental effect on the market? Is history a good teacher (I touched the hot frying pan, I burned my finger...I wont do that again!)? Sure it is. Why can't it be a good teacher for the stock market (ergo the use of charts and other technical indicators)? Malkiel regularly alludes to the element of risk and beta. He believes that beta (a stocks relative volatility or sensitivity to the market) does capture at least some aspect of what we normally think of as risk. His conclusion is that "Investors should scoop up low-beta stocks..." but not use beta as a "...substitute for brains and cannot be relied on as a simple predictor of long-run future returns." Surely, if by definition beta is a backward-looking measurement of a stocks movement relative to the market, couldn't other historical measuring sticks (technical and fundamental analysis) be useful tools also? It is these inherent contradictions that weaken the Randomaniacs theories. Should this book be bought? Not in my opinion (although, I bought it...).Even though Malkiel tries, he does not statistically prove the Random Walk theory. In reality, it seems doubtful that statistical evidence will ever prove or disprove Random Walk. But, to invest successfully, one must understand how other investors and traders are thinking. Knowing about Random Walk (not intrinsically believing it) should help you make better investment decisions. However, it is not necessary to plow through the hundreds of pages in this book. So, put your darts away and embark on a less-random investment strategy.
Rating: 
Summary: Recommended to me, and I would recommend it to you.
Review: A very good book. Get for yourself and give it a read. Most of the negative comments, about the book, are charged with emotions. Obviously, the author said somethings that went against how these few people trade. If you are serious about investing, the book will give you more insight.
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Summary: Just buy that index fund
Review: According to the book and based on studies over a twenty-five year period, more than two-thirds of professionally-managed stock funds were outperformed by an unmanaged S&P500 index fund. There, I summarized the whole book. I believe the author is credible because he holds the same view as Warren Buffet. Malkiel does not fully believe in an efficient market or as he calls it, the random-walk theory (so much for the title). He believes in somewhere in between just as Buffet. That is, the market does not always behave rationally or efficiently and it is precisely these times an intelligent investor can reap big rewards. He can't fully believe in the Random-Walk Theory. The studies mentioned above made it clear that one-third of the portfolio managers do beat the market. And then there is the legendary Warren Buffet who has consistently beat the market. The only difference between Malkiel and Buffet is attitude. Where as Buffet believes he can find those inefficiencies in the market and profit from them, Malkiel believes it is very rare and not worth the effort. So the former sees the bottle half-full and the latter sees it half-empty. How you invest depends on what type of person you are. Let's look at the choices. Remember, two-thirds of the stock funds cannot beat the index, so that means one-third of them are outperfoming the market. So you can look for these guys and they do exist (Magellan, Templeton, although the original portfolio managers are long gone). Or you can believe you are as smart as Warren Buffet! And pick your own winning stocks...good luck...but if you can, this is a better way to invest than with mutual funds since there are no annual fees. Or just forget it, and as the author suggests, buy that index fund. I like it, simple and in the middle between the three choices since the fees for the index fund are very low. But this is what the stock market is about without reading over 400 pages!
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Summary: Intermediate level Theory for the savy Investor or beginner
Review: As a 25 yr old newbie with no investment experience and money not yet in the stock market, Malkiel does a great comprehensive job of laying out the theories which drive the market day to day. After reading an array of stock picking books and strategies such as Chicken Stocks or Penny stocks, it was refreshing to catch up on the history of the market and the theories central to an investor's future discipline. A must read which is intelligent enough to open itself up to criticism but still back up its principles. Does not get bogged down in advanced financial math or overly difficult concepts, but conveys the principles upon which the stock market operates and with which your financial planners guide your money. Good humor laced throughout and a great overview of the last 5 years, which have been rough to say the least.
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Summary: Entertaining overview of important investment concepts
Review: As a financial consultant in a global financial services firm, I wholeheartedly recommend this book to anyone in the markets. Burton Malkiel's central concepts still hold up in this seventh edition. He updates with stories of the latest investment follies, and uses them to back up his central assertion: investing in the capital markets requires a long-term time horizon, an understanding of the risks involved, a resistance to rushing into the latest hot trend without researching it, and some kind of investment strategy. (Those investors who trade, trade, trade on broker advice should always remember: Brokers make money on every trade in commissions-- they don't care if *you* lose all of your money.) Burton's continued support of index funds as an important part of any diversified asset strategy is backed up by good, rigorous research. Even the best active managers get burned-- Warren Buffett's hot streak finally ran out in the first half of this year, didn't it? Mean reversion does finally win out in the long run. Investors who play the stock market like the Lotto always lose out to the long-term strategists. "A Random Walk down Wall Street" is, and will always be, an immensely valuable work.
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Summary: classic title, but applicable in today's investing world
Review: Dr. Malkiel's thesis concerning market's unpredictability and how to invest smartly probably stepped on one too many toes in the world of professional money managers and planners. Too bad, its proven. if you read the old edition back in 20-30 years ago, you'll see that his prediction about the performance of index funds rings true...it outperformed 2/3 of all professionally managed funds. he gave sounds advice on investing. at the same time, his writing style is entertaining. highly recommended. eric tyson's investing for dummies is another good one.
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Summary: Buy the newer edition
Review: Great book, but don't buy it -- there is a newer edition (2004) availble.
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Summary: Quite true (in the long run).
Review: Having a break from school, my Finance professor suggested I read a book to help prepare me for my future in Finance. Because I have a limited background in Finance, he suggested that I read "A Random Walk" because of my insistence of finding the truth if the Efficient Market Hypothesis/Random Walk is a plasusible theory. Before reading the book I did not completly understand the logic that markets are Semi-Strong Efficient (public information/fundalmental analysis is priced into markets). After reading "A Random Walk", I finally came to a conclusion that markets are Semi-Strong. Looking at my other major (Information Systems), there is a strive to reduce the use of human intervention in systems. The goal is to automate the whole process in order to make it error proof against the human ability for failure. If companies pay for information systems with little human intervention to produce the most efficient system, then why do we hire managers to intervene in our money? Probably because of the flashy advertisments we see. Reading the book and looking at the Wall Street Journal, I have come to the opinion that the index-fund is the best option for the individual. It is the most efficient (making the highest returns for a given level of risk) and the least prone to human errors. Index-funds are designed to not be flashy, does not have humans picking stocks, yet over the long run provides the most returns. So why do we have fundalmental analysis, portfolio managers, reports, etc.? Most likely because we as humans always like to believe that we are better than our neighbors. We believe that we can pick a better portfolio. Unfortunatly, the odds are against you. To mettle is more likely to err. Overall a very good book. I especially liked the history lesson of financial bubbles. If only I read this book before the Internet bust...
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Summary: Great, interesting book
Review: I read this for my finance class at Cornell University and I can definitely say that it was a perfect introduction to many topics in finance, especially mutual funds and the all important index fund. Malkiel writes so that anyone will have an easy time flying through this book in no time, and also learning a lot along the way.
Rating:
Summary: An excellent primer
Review: The book focuses on the efficient market theory. Whether or not you agree with the theory, this book provides a great deal of background on overall investing. Particularly interesting were the sections on investing fads and follies and how the perils of certain types of analysis. I wouldn't recommend working with an investement professional before you have read and digested this book.
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