Certainly index fund, although general statistical data that record the excellent yield than active fund is, it is not a theory never to guarantee the absolute superiority. In fact in the United States, than index funds linked to the S & P500 index, and value stocks ETF to invest in low PBR brand, is more of the ETF to invest in high-dividend stocks, have been found to record a higher yield.
The cause of this, has to do with the drawback that index fund faced. Index fund holds on to take a similar position and stock index such as the Nikkei average and the S & P500 index, but most of the stock index will not determine the percentage incorporated based on the market capitalization of the company. But market capitalization regardless absolutely in the interests of our company, I will be greater because of its popular enterprise if the higher stock price rises.
America popular brand and of the IT bubble period of, as Livedoor was the case in Japan, stocks only popular precedes I did not have decent income raised is always present. If you are going to buy the stock by market capitalization rate, you encounter a problem that entity would offer much more than necessary the popular companies and overvalued stocks that are not accompanied.
"The stock market is always efficient, all good material also bad news are also woven into the stock price" efficient market hypothesis that, in the long-term span's the the street, but it is not at all satisfied in the short term. If you're incorporates all stock prices, because the supposed stock prices hardly move, not attached and that a variety of bubble has been going on in the world, a description of that market crash, such as Black Monday and the Lehman shock or happened does.
On the other hand, long-term in the world stock market there is data that settle to the plus before and after year average of 10%. To recite the behavioral finance theory in the short term, the stock market is up and down significantly from the psychological impact of the participants, in the long term will incorporate all of the good materials and bad news, along the economic growth stock it is going to rise. Various bubble sure to collapse, also from history that have been a number of crash also eventually recover, the market I can determine that there is a tendency to converge to the efficient state over time.
Former as there was a "fundamental faction" and the "Technical School" controversy, even among the efficient market hypothesis believers and behavioral finance theory believers now, it seems to have been arguing the correctness of each other's theory. However, the two theories, both are correct, also is there side both incorrect. Although correct behavioral finance theory in the short term, and I said that is correct efficient market hypothesis in the long term.
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