Asset Pricing Quotes

You don't get rewarded for taking risk; you get rewarded for buying cheap assets. And if the assets you bought got pushed up in price simply because they were risky, then you are not going to be rewarded for taking a risk; you are going to be punished for it.

In the 1930s, there was a stretch where you could borrow more against the real estate than you could sell it for. I think that's what's going on in today's private-equity world.

How do we know when irrational exuberance has unduly escalated asset values?

Speculation is a parasite feeding upon values, creating none.

It is an unfortunate fact that great and foolish excess can come into prices of common stocks in the aggregate. They are valued partly like bonds, based on roughly rational projections of use value in producing future cash. But they are also valued partly like Rembrandt paintings, purchased mostly because their prices have gone up, so far.

Reversion to the mean is the iron rule of the financial markets.

Market prices are always wrong.

There is such an overvaluation of technology stocks that it is absurd. I would include our stock in that category. It is bad for the long-term worth of the economy.

To some extent, stocks are like Rembrandts. They sell based on what they've sold in the past. Bonds are much more rational. No-one thinks a bond's value will soar to the moon.

Investors must keep in mind that there's a difference between a good company and a good stock. After all, you can buy a good car but pay too much for it.

Market value is irrelevant to intrinsic value. ... Unqualified judgment can at most claim to decide the market-value - a value that can be in inverse proportion to the intrinsic value.

Even defensive portfolios should be changed from time to time, especially if the securities purchased have an apparently excessive advance and can be replaced by issues much more reasonable priced.

The biggest mistake investors make is to believe that what happened in the recent past is likely to persist. They assume that something that was a good investment in the recent past is still a good investment. Typically, high past returns simply imply that an asset has become more expensive and is a poorer, not better, investment.

I take the market-efficiency hypothesis to be the simple statement that security prices fully reflect all available information.

Fundamental analysis seeks to establish how underlying values are reflected in stock prices, whereas the theory of reflexivity shows how stock prices can influence underlying values

Imperfect substitutability of assets implies that changes in the supplies of various assets available to private investors may affect the prices and yields of those assets.

Arbitrage proof has since been widely used throughout finance and economics.

The world of derivatives is full of holes that very few people are really aware of. It's like hydrogen and oxygen sitting on the corner waiting for a little flame.

I don't entirely reject the idea of efficient markets. It needs updating.

I never ask if the market is going to go up or down because I don't know, and besides it doesn't matter. I search nation after nation for stocks, asking: 'Where is the one that is lowest-priced in relation to what I believe it's worth?' Forty years of experience have taught me you can make money without ever knowing which way the market is going.

I mean, you can explain the fact that these are depressed prices, you know. We think these assets are going to be worth a lot more. And I think that case can be made in certain situations. But I think to just say, you know, we're going to say a dollar of cash is worth $2 all of a sudden, it isn't worth $2. It's worth a dollar today.

Investment students need only two well-taught courses - How to Value a Business and How to Think About Market Prices

You're looking for a mispriced gamble. That's what investing is. And you have to know enough to know whether the gamble is mispriced. That's value investing.

We define a bargain issue as one which, on the basis of facts established by analysis, appears to be worth considerably more that it is selling for.

One common way of judging whether housing's price is in line with its fundamental value is to consider the ratio of housing prices to rents. This is analogous to the ratio of prices to dividends for stocks.