Investment Research: How Much is Enough

16 Pages Posted: 28 Jul 2009

See all articles by Bradford Cornell

Bradford Cornell

Anderson Graduate School of Management, UCLA

Date Written: June 2009

Abstract

Aside from the decision to enter the equity market, the most fundamental question an investor faces is whether to passively hold the market portfolio or to do investment research. This thesis of this paper is that there is no scientifically reliable procedure available which can be applied to estimate the marginal product of investment research. In light of this imprecision, investors become forced to rely on some combination of judgment, gut instinct, and marketing imperatives to determine both the research approaches they employ and the capital they allocate to each approach. However, decisions based on such nebulous criteria are fragile and subject to dramatic revision in the face of market movements. These revisions, in turn, can exacerbate movements in asset prices.

Keywords: Investment Research

JEL Classification: G10

Suggested Citation

Cornell, Bradford, Investment Research: How Much is Enough (June 2009). Available at SSRN: https://ssrn.com/abstract=1439951 or http://dx.doi.org/10.2139/ssrn.1439951

Bradford Cornell (Contact Author)

Anderson Graduate School of Management, UCLA ( email )

Pasadena, CA 91125
United States
626 833-9978 (Phone)

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