Five Lessons I’ve Learned About Research and Investing
As he retires from a 20-year career with Dimensional, researcher Jim Davis refects on the lessons he learned as he transitioned from academia to the real-world business of investing.
In the mid-1990s, Jim Davis was a professor of fnance at Kansas State University. As he pursued tenure, he painstakingly hand-collected valuation fgures and other accounting data going back to the early 1940s—at the time, these data were comprehensively available only from 1963—and published a study on value stocks that went back much farther than any previous research. That study led to a collaboration with groundbreaking academics and Dimensional Directors Gene Fama and Ken French. Together, they extended the survey back to the 1920s and provided additional evidence on the relation between book-to-market and cross-sectional differences in average stock returns.
As a result of this collaboration, Jim decided to leave academia and join Dimensional’s Research group. Over the years, he conducted rigorous research on investing; he wrote white papers that were clear, concise, and clever; and he presented at many of our conferences. When Jim decided to retire, we asked him to share what he has learned about investing during his years in academia and at Dimensional. We hope you enjoy his parting gift.
1. THIS REAL-WORLD BUSINESS OF INVESTING IS A SERIOUS BUSINESS.
Please see the end of this document for important disclosures. In 1994, as my fellow students and I were preparing to leave the PhD program at the University of Illinois and begin our academic careers, we would sometimes joke that it was a relief to be going into a career in which our mistakes wouldn’t be life threatening. If we miscalculated a t-statistic in a journal article, nobody was going to die as a result. Upon joining Dimensional fve years later, I quickly realized that many people rely on our research to guide them in investing their life savings. They trust us to provide research and investment solutions that will help them achieve their goals. They trust us to help make a difference in their lives. What we do really matters.
To read on, click here.
Robert J. Pyle, CFP®, CFA is president of Diversified Asset Management, Inc. (DAMI). DAMI is licensed as an investment adviser with the State of Colorado Division of Securities, and its investment advisory representatives are licensed by the State of Colorado. DAMI will only transact business in other states to the extent DAMI has made the requisite notice filings or obtained the necessary licensing in such state. No follow up or individualized responses to persons in other jurisdictions that involve either rendering or attempting to render personalized investment advice for compensation will be made absent compliance with applicable legal requirements, or an applicable exemption or exclusion. It does not constitute investment or tax advice. To contact Robert, call 303-440-2906 or e-mail info@diversifiedassetmanagement.com.
The views, opinion, information and content provided here are solely those of the respective authors, and may not represent the views or opinions of Diversified Asset Management, Inc. The selection of any posts or articles should not be regarded as an explicit or implicit endorsement or recommendation of any such posts or articles, or services provided or referenced and statements made by the authors of such posts or articles. Diversified Asset Management, Inc. cannot guarantee the accuracy or currency of any such third party information or content, and does not undertake to verify or update such information or content. Any such information or other content should not be construed as investment, legal, accounting or tax advice.