Keynes the Stock Market Investor: A Quantitative Analysis

54 Pages Posted: 17 Mar 2012 Last revised: 19 Mar 2016

David Chambers

University of Cambridge - Judge Business School, Department of Finance & Accounting

Elroy Dimson

University of Cambridge - Judge Business School; London Business School

Justin Foo

University of Cambridge - Judge Business School

Date Written: September 26, 2013

Abstract

The consensus view of the influential economist John Maynard Keynes is that he was a stellar investor. We provide an extensive quantitative appraisal of his performance over a quarter-century in both calendar and event time, and present detailed empirical analysis of his archived trading records. His top-down approach generated disappointing returns in the 1920s and we find no evidence of any market-timing ability. However, from the early 1930s his performance improved as he evolved into a bottom-up stock-picker with high tracking error, substantial active risk, and pronounced size and value tilts. Our careful reconstruction of Keynes’ stock trading provides a unique record of realized performance and sheds light on how equity focussed investing developed historically.

Keywords: Keynes, performance measurement, asset allocation, behavioral finance, value investing, endowment, innovation

JEL Classification: B26, G11, G14, G23

Suggested Citation

Chambers, David and Dimson, Elroy and Foo, Justin, Keynes the Stock Market Investor: A Quantitative Analysis (September 26, 2013). Journal of Financial and Quantitative Analysis (JFQA), Vol 50, No 4, 2015, pages 431–449. Available at SSRN: https://ssrn.com/abstract=2023011 or http://dx.doi.org/10.2139/ssrn.2023011

David Chambers (Contact Author)

University of Cambridge - Judge Business School, Department of Finance & Accounting ( email )

Trumpington Street
Cambridge, CB2 1AG
United Kingdom
44 (0)1223 339700 (Phone)

Elroy Dimson

University of Cambridge - Judge Business School ( email )

Trumpington Street
Cambridge, CB2 1AG
United Kingdom
+44 20 7000 8212 (Phone)
+44 700 607 7390 (Fax)

London Business School ( email )

Sussex Place
Regent's Park
London, NW1 4SA
United Kingdom
44 20 7000 7000 (Phone)
44 700 607 7390 (Fax)

Justin Foo

University of Cambridge - Judge Business School ( email )

Trumpington Street
Cambridge, CB2 1AG
United Kingdom

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