Tuesday, August 22, 2006

A stimulating example about individual stocks and indexing

Hedonic adjustment has a fun post discussing the value of indexes vs. individual stocks. You can see it here.

Anyone who's been stung by focussed investments in specific securities can sympathize with his discussion of Toll Brother's stock performance.

In addition, many other non-economic factors can effect individual stock performance, such as insider sales activity (even when legal). Look at the performance of Shanda Interactive last August when insiders began selling off stok (per planned schedule). It helped drive the price down dramatically.

Have a wonderful day,

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