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The efficient market theory suggests that while investors are not clairvoyant, they are rational, informed, and unbiased. Based on these conditions, one can expect that the current stock price is the best estimate of the true value for a security....
Of Models and Men
Investment Letters
Financial models are often used to quantify return and risk expectations. The purpose of these models is to capture complex realities in a form useful for decision-making. At Diamond Hill, the principal model we employ for evaluating equities was first...
The Times They Are A-Changin’
Investment Letters
"The line it is drawn the curse it is cast The slow one now will later be fast As the present now will later be past The order is rapidly fadin' And the first one now will later be last...
“It is dangerous to apply to the future inductive arguments based on past experience, unless one can distinguish the broad reasons why past experience was what it was.” — John Maynard Keynes Applying Keynes statement to the S&P 500, the...
The Meaning of Risk
Investment Letters
Webster’s dictionary defines risk as the possibility of suffering harm or loss. While Webster’s is not infallible, we believe this definition is reasonably close to a common sense definition of the term. Thus, financial risk is the possibility the money...
The philosopher George Santayana said, "Those who cannot remember the past are condemned to repeat it." Many investment "professionals" have taken this slogan to heart, spending an inordinate amount of time looking at the long ago past in an attempt...
“Market commentators and investment managers who glibly refer to “growth” and “value” styles as contrasting approaches to investment are displaying their ignorance, not their sophistication. Growth is simply a component – usually a plus, sometimes a minus – in the...
How Safe Is The S&P 500?
Investment Letters
September 11, 2001 – As the following newsletter goes to press, we mourn the tragedy of the terrorist attacks that took place earlier today. The devastation to humanity and freedom is immense and enduring. Our fiduciary responsibility requires us to contemplate the...
“The person who goes farthest is generally the one who is willing to do and dare. The sure-thing boat never gets far from shore.” -Dale Carnegie “Some men are born mediocre, some men achieve mediocrity, and some men have mediocrity...
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