I just finished reading “Imitation is the Sincerest Form of Flattery: Warren Buffett and Berkshire Hathaway”, a 42 pages research paper (free PDF file) by two university finance professors.
The paper is a good read although it may be a challenge to read through the paper without feeling totally confused at some point.
Here are some unexpected takeaways for me (the expected ones are pretty much in the abstract of the paper),
- A 4.5 pages tutorial on SEC forms 10K, 13F, 13D, 13G, 3, 4, 5, 13D/A, and 13G/A. And wow, I read them all!
- How they correct the so-called “ex-post selection bias”
- “Overall, we conclude the performance of Berkshire Hathaway’s investment portfolio indicates superior investment skill in direct contradiction to Efficient Market Theory (EMT).” I have hated EMT as a theory for years even it is a required part of any Finance course. I am also delighted to read this footnote (emphasis mine),
- “In the book “Poor Charlie’s Almanack”, Charles T. Munger, Berkshire Hathaway’s Vice Chairman, interestingly notes that Paul Samuelson [Nobel Economist 1970] who was one of the important early proponents of efficient markets theory has had a significant investment in Berkshire Hathaway for a long time. In Munger’s words, “it appears Samuelson was hedging”.“
Further readings: I have blogged extensively about what I know of Warren Buffett so feel free to check out the entries I’ve tagged with Warren Buffett.
Disclosure: I have direct, indirect or imaginary investment in Warren Buffett’s Berkshire Hathaway. So considered yourself warned of my potential bias or lack of bias. (smile)
Credit: I think I originally heard about this paper from Paul Kedrosky but I can’t seem to find his original entry now. Thanks Paul (I think).
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