Market Sense and Nonsense: How the Markets Really Work (and How They Don't)

Jack Schwager

Wiley,  November 2012

When it comes to investment models and theories of how markets work, convenience usually trumps reality. The simple fact is that many revered investment theories and market models are flatly wrong -- that is, if we insist that they work in the real world. Unfounded assumptions, erroneous theories, unrealistic models, cognitive biases, emotional foibles, and unsubstantiated beliefs all combine to lead investors astray -- professionals as well as novices.

In this engaging new book, Jack Schwager, bestselling author of the Market Wizards series, takes aim at some of the most pervasive market precepts, money management misconceptions, and irrational investor behaviors. From the theory of efficient markets to buying in up markets and selling in down markets, Schwager turns each misguided idea on its head, one at a time. Supported by a wealth of well-documented historical evidence and a healthy dose of common sense, he exposes the truth about the cherished assumptions and fallacious thinking at the core of some of the most respected investment theories and models and explores many common investor errors. In this book, you'll discover why:

  • Expert opinion is NOT more reliable than the proverbial dart-throwing chimp
  • The markets are NOT efficient
  • Low volatility does NOT necessarily imply low risk, and high volatility does NOT necessarily imply high risk
  • Market prices are NOT normally distributed
  • Investing in equities when markets are doing well is NOT conducive to achieving above-average returns
  • Concentrating on funds with the strongest record of returns is NOT a sound strategy
  • Past returns are NOT a reliable indicator of future performance
  • A hedge fund portfolio strategy is NOT riskier than a traditional portfolio approach
  • VaR does NOT provide a good indication of worst-case risk
  • Superior performance does NOT necessarily imply manager skill

But Schwager does much more than simply burst bubbles; he offers a sobering draught of real-world investment insight and guidance spanning both traditional and alternative investment classes. Drawing upon his years as an asset manager and trader, he shares priceless lessons on an array of investing topics, both basic and advanced, including portfolio management, risk assessment, investment selection, hedge fund investing, investment timing, and much more.

Market Sense and Nonsense is an indispensable source of real-world market wisdom and investing know-how for investors of every ilk.

Hardcover | ISBN: 9781118494561 | Publication Date: November 2012


"This book is a real joy. Smart, clever, funny; deliciously concise. No bull. It tells you what investing is really about, which most certainly isn't what the fakes in the financial services industry, and their paid cheerleaders in the media and academia, want you to think it is about. Mr. Schwager has performed a major service for anyone who ever gets a spare dime to invest and wants to know how to avoid making a mistake. This book is destined to be one of the greatest texts on markets and investing for discussion in schools, universities and barrooms the world over."
-- Martin Taylor, Investment Manager, Nevsky Fund PLC

"This is a very ambitious book which succeeds on all counts. It is not a book with just one idea explained repeatedly with different anecdotes. It covers a huge amount of ground across the spectrum of risk and investing, both in theory and in practice. It addresses many of the difficult issues faced by investment professionals today, but written in a way which is designed to be understood by people without a background in investing or finance."
-- Colm O'Shea, Founding Partner and CIO, COMAC Capital LLP

"If this book had been available when I started out in the financial markets I would have saved a lot of learning time over the next fifty years. A great guide to understanding how investing and markets really work."
-- Edward O. Thorp, author of Beat the Dealer and Beat the Market

"Jack Schwager's new book, Market Sense and Nonsense, deftly addresses a large number of seldomly clarified facts and myths about the investment management business."
-- Jaffray Woodriff, cofounder, Chairman, and CEO, Quantitative Investment Management

"If you believe in investigating before you invest, and in knowing what works and what doesn't work, you are likely to do well reading Schwager."
-- Ed Seykota