David Dreman: Deficient Market Theory Click here to go to the original topic          Value Investing Forum Forum Index -> Guru Watch blast_investor Thu Feb 16, 2006 6:26 pm     David Dreman: Deficient Market Theory  Deficient Market Theory David Dreman, 02.27.06, 12:00 AM ET How nice life would be if all bad ideas went out of style, like the divine right of kings, medicinal bloodletting and leisure suits. Unfortunately, a muddled notion called the efficient market hypothesis refuses to go away. This absurd thesis holds that nobody can beat the market, stocks always are correctly priced according to what's publicly known about them and any mispricings are chimeras. Such blind faith in the market's omniscient rationality led to investor losses of $1 trillion in the 1987 crash and $7 trillion in the 2000-02 postbubble slump. It ignores the commonsense effects of fads and manias. Every year or so I take another look to see if this silliness is on the way out (see my Mar. 1, 2004 column). But then I find that, like Dracula emerging from his tomb, efficient market dogma keeps returning to do harm. Many investment advisers still believe in it; their clients should beware. Lately the most common failings of efficient market practitioners have been: •Overdiversifying. •Not bottom-feeding. •Using beta as a benchmark. David Dreman recommends 3 stocks: Chevron (59, CVX), Tyco (25, TYC) UST (39, UST), Read more          Value Investing Forum Forum Index -> Guru Watch Page 1 of 1 Search Engine Indexer BlastInvest @2005 p h p B B © 2001, 2002 p h p B B Group