When a stock goes down big, the bears gang up on it. For no more reason than they could gang up on any other stock. But whatever the company does, the good isn't enough and whatever is bad anywhere is magnified 100 fold.

Further, the danger of looking at files that are not as of the time of announcement without changes should be emphasized.

And Andy Lo 's point about Compustat never being the same because they change all the time is also underlined. I am reading a book about chronic bears and it is the worst book I've ever read. (One was asked to review it). But they are great at spreading bearish news about stocks at conferences and among their friends. It doesn't take much to start a stampede. People are descended from the oxen, as beautifully limned by Galton.

I thought silver cheap at 14 bucks. But my friends in the pit remembered it at 3 bucks and told me it seemed expensive to them even after it had dropped from 40 to 14. I made the same mistake over and over with other stocks I've owned. Part to blame is studies that show the worst perform the best. Many of these studies I now believe are terribly biased. Also to blame is the natural tendency to try to get part of someone's hide.

Gary Rogan comments: 

It seems to me that most things based on some novel, original ideas once hit rarely recover, but things based on execution, or the economy, or something very common and prosaic, or that have a long and previously successful history, often do recover.

It is also often impossible to tell which category the thing belongs to once it's a little old and complicated, and old things do get totally obsolete but the newer something is, it is obviously more high risk/high return. So this is all obvious, but somehow undifferentiated studies that predict what happens to the worst have to be separated into novel/"old school" components.


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