Daily Speculations

The Web Site of Victor Niederhoffer & Laurel Kenner

Dedicated to the scientific method, free markets, deflating ballyhoo, creating value, and laughter;  a forum for us to use our meager abilities to make the world of specinvestments a better place.

 

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06/19/2004
Debashis Basu: Does Buy-and-Hold Work Outside the U.S.?

  1. Buy and hold works in a country where enterprise system is allowed to work. How many countries qualify? Is there an index of enterprise intensity and can it be correlated to market advance? Can we count? What if a country has a rule of law and a strong enterprise system but less developed stock markets?
  2. Or what about countries where the enterprise system does not exactly resemble that of the US and yet considerable economic growth has resulted over a long period of time (Germany, South Korea, Japan). Will buy and hold work there? What if their markets are less developed and capital allocation is happening through banks not markets?
  3. What about another category of countries which are developing fast but not in the US paradigm (China) with the bulk of the physical growth being created by 100% subsidiaries of foreign companies. What do you buy and hold there?
  4. Do ever-changing cycles occur there too? What kind?

  5. Finally, the better an enterprise system functions will there be more and more Studebakers and Microsofts? If so, will frequent stock selection be even more critical than in a country where corporate deaths are slower? Will buy and hold be a better strategy than buy and sell -- just to match up to the competitive spirit of an enterprise system?