Question

What evidence does Gibson provide against timing the market in the book of Asset Allocation? Why is it so difficult to be successful at timing the market? Feel free to bring up points discussed by Benjamin Graham in his The Intelligent Investor book.

Answer 1

In the book 'Asset Allocation,' Gibson provides evidence against timing the market. Other financial investors trying to do the same thing and the challenge of predicting future expectations make timing the market difficult. Benjamin Graham's book 'The Intelligent Investor' also discusses the difficulty of predicting stock price movements based on future expectations.

Step-by-step explanation:

In the book 'Asset Allocation,' Gibson provides evidence against timing the market by explaining the problems with attempting to buy stocks in companies that will have higher prices in the future. He states that many other financial investors are also trying to do the same thing, so identifying a company that will earn high profits doesn't guarantee success because the stock price will already be high.

This concept is related to Benjamin Graham's 'The Intelligent Investor' as he discusses the random walk theory, which highlights the difficulty of predicting stock price movements based on future expectations. Graham explains that it is extremely difficult, even for financial professionals, to predict changes in future expectations and choose stocks with rising prices.

Overall, the evidence provided by Gibson and the teachings of Benjamin Graham demonstrate that timing the market is difficult due to the presence of other investors trying to do the same thing and the challenge of accurately predicting future expectations.