Keynes the Stock Market Investor: A Quantitative Analysis

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.

[1]  Oldrich A. Vasicek.  A NOTE ON USING CROSS-SECTIONAL INFORMATION IN BAYESIAN ESTIMATION OF SECURITY BETAS , 2015 .

[2]  Robert C. Merton,et al.  On Market Timing and Investment Performance Part II: Statistical Procedures for Evaluating Forecasting Skills , 2015 .

[3]  J. Lewellen.  The Cross Section of Expected Stock Returns , 2014 .

[4]  Clifford S. Asness,et al.  Value and Momentum Everywhere: Value and Momentum Everywhere , 2013 .

[5]  J. Carlen.  The Einstein of Money: The Life and Timeless Financial Wisdom of Benjamin Graham , 2012 .

[6]  J. Lewellen,et al.  Institutional investors and the limits of arbitrage , 2011 .

[7]  William N. Goetzmann,et al.  The Efficient Market Theory and Evidence: Implications for Active Investment Management , 2011 .

[8]  R. Stambaugh,et al.  The Short of It: Investor Sentiment and Anomalies , 2011 .

[9]  Christopher J. Malloy,et al.  Decoding Inside Information , 2010 .

[10]  William N. Goetzmann,et al.  Educational Endowments in Crises , 2010, The Journal of Portfolio Management.

[11]  P. Dent.  Animal Spirits – How Human Psychology Drives the Economy, and Why it Matters for Global Capitalism , 2010 .

[12]  E. L. Smith.  Common Stocks as Long Term Investments , 2010 .

[13]  K. Brown,et al.  Asset allocation and portfolio performance: Evidence from university endowment funds , 2010 .

[14]  Stephen G. Dimmock,et al.  How University Endowments Respond to Financial Market Shocks: Evidence and Implications , 2010 .

[15]  Robin Darwall-Smith.  Riches and Responsibility: The Financial History of Trinity College, Cambridge , 2010 .

[16]  Eric Zitzewitz,et al.  Should Benchmark Indices Have Alpha? Revisiting Performance Evaluation , 2010 .

[17]  K. J. Martijn Cremers,et al.  How Active is Your Fund Manager? A New Measure That Predicts Performance , 2009 .

[18]  Clifford S. Asness,et al.  Value and Momentum Everywhere , 2009 .

[19]  D. Chambers,et al.  IPO Underpricing Over the Very Long Run , 2009 .

[20]  Tan Wang,et al.  Keynes Meets Markowitz: The Tradeoff between Familiarity and Diversification , 2009, Manag. Sci..

[21]  B. Cheffins.  Corporate Ownership and Control: British Business Transformed , 2009 .

[22]  B. Cheffins.  Corporate Ownership and Control , 2008 .

[23]  A. Schoar,et al.  Secrets of the Academy: The Drivers of University Endowment Success , 2007 .

[24]  Christopher J. Malloy,et al.  The Small World of Investing: Board Connections and Mutual Fund Returns , 2007, Journal of Political Economy.

[25]  David F. Swensen.  Unconventional Success: A Fundamental Approach to Personal Investment , 2005 .

[26]  Z. Ivkovich,et al.  Portfolio Concentration and the Performance of Individual Investors , 2004, Journal of Financial and Quantitative Analysis.

[27]  Ming Huang,et al.  Does Fund Size Erode Mutual Fund Performance? The Role of Liquidity and Organization , 2004 .

[28]  R. Skidelsky.  John Maynard Keynes: 1883-1946: Economist, Philosopher, Statesman , 2003 .

[29]  S. Nagel,et al.  Capturing the Value Premium in the United Kingdom , 2003 .

[30]  M. Collins,et al.  The asset portfolio composition of British life insurance firms, 1900–1965 , 2003, Financial History Review.

[31]  Christian Schlag.  Strategic Asset Allocation: Portfolio Choice for Long‐Term Investors. , 2003 .

[32]  P. Scott.  Towards the 'Cult of the Equity'? Insurance Companies and the Interwar Capital Market , 2002 .

[33]  R. Skidelsky,et al.  John Maynard Keynes: Fighting for Britain 1937 - 1946 , 2001 .

[34]  Terrance Odean,et al.  The Courage of Misguided Convictions , 1999 .

[35]  Philippe Jorion,et al.  GLOBAL STOCK MARKETS IN THE TWENTIETH CENTURY , 1999 .

[36]  Terrance Odean.  Do Investors Trade Too Much? , 1998 .

[37]  William N. Goetzmann,et al.  The Dow Theory: William Peter Hamilton's Track Record Re-Considered , 1998 .

[38]  Terrance Odean,et al.  Are Investors Reluctant to Realize Their Losses? , 1996 .

[39]  R. Skidelsky,et al.  Keynes: The Return of the Master , 1996 .

[40]  D. Andrews.  Tests for Parameter Instability and Structural Change with Unknown Change Point , 1993 .

[41]  E. Fama,et al.  Common risk factors in the returns on stocks and bonds , 1993 .

[42]  S. Titman,et al.  The Persistence of Mutual Fund Performance , 1992 .

[43]  Eugene N. White,et al.  The Stock Market Boom and Crash of 1929 Revisited , 1990 .

[44]  G. Constantinides.  The Disposition to Sell Winners Too Early and Ride Losers Too Long: Theory and Evidence: Discussion , 1985 .

[45]  J. Chua,et al.  J. M. Keynes's Investment Performance: A Note , 1983 .

[46]  N. J. Johnson,et al.  Modified t Tests and Confidence Intervals for Asymmetrical Populations , 1978 .

[47]  R. Lekachman.  The Collected Writings of John Maynard Keynes , 1973 .

[48]  H. Richardson,et al.  A Study of the Capital Market in Britain from 1919-36. , 1967 .

[49]  A. T. Grant.  A Study of the Capital Market in Britain from 1919-1936 , 1967 .

[50]  J. Davis.  Economic and Financial Progress in Europe , 1923 .

[51]  Douglas W. Blackburn,et al.  SERIES-2012 WORKING PAPER 2012-001 “ Is Trading Behavior Stable across Contexts ? Evidence from Style and Multi-Style Investors ” , 2015 .

[52]  Jianfeng Yu,et al.  The short of it , 2012 .

[53]  M. Marcuzzo.  Speculation and regulation in commodity markets: The Keynesian approach in theory and practice , 2012 .

[54]  G. V. Kooten,et al.  2004-07 – Another Look at the Income Elasticity of Non-Point Source Air Pollutants: A , 2009 .

[55]  P. Clarke.  Keynes : the twentieth century's most influential economist , 2009 .

[56]  S. P. Kothari,et al.  Econometrics of Event Studies , 2007 .

[57]  Harvard Business School , 2007 .

[58]  R. Backhouse,et al.  Cambridge companion to Keynes , 2006 .

[59]  Mike Staunton,et al.  Triumph of the Optimists: 101 Years of Global Investment Returns Princeton , 2002 .

[60]  Terrance Odean,et al.  The Courage of Misguided Convictions , 1999 .

[61]  B. Hansen.  Approximate Asymptotic P Values for Structural-Change Tests , 1997 .

[62]  P. V. Mini.  Keynes' Investments: Their Relation to the General Theory , 1995 .

[63]  D. Moggridge.  Maynard Keynes: An Economist's Biography , 1992 .

[64]  L. Hannah.  Inventing retirement: Accident and design in the evolution of pensions , 1986 .

[65]  R. Skidelsky.  Hopes betrayed, 1883-1920 , 1983 .

[66]  J. Keynes,et al.  The Collected Writings of John Maynard Keynes: Surplus, Relief and Commodity Policy , 1971 .

[67]  D. Corner,et al.  Investment and unit trusts in Britain and America , 1968 .