Cocmclsuion Book Reviews Example

Book Review – A Random Walk Down Wall Street

Introduction
This paper entails a comprehensive review of specific chapters of a book titled “ A Random Walk Down Wall Street’’ which is authored by Burton Makiel. This analysis will focus primarily on the 10th edition of the book, and five specific chapters will be reviewed in great depth in this paper.
The five chapters that will be analyzed in this book are chapter six, which addresses the concept of technical analysis and chapter 7, which correspondingly talks about fundamental analysis as an alternative approach. The book will also focus of chapter 10 in which the concept of Behavioral Finance has been introduced by the author. In chapter 11 of the book which will also be reviewed in this paper, the author addresses the concept of the Efficient Market Theory by highlighting its main characteristics and components. Finally, this review will conclude with an analysis of chapter 14 of the book, where the author gives a framework that can be used by individuals in their investment decisions for the long haul.

Chapter Six: Technical Analysis

In chapter six of the book, Burton Makiel introduces the concept of technical analysis and how it is applied by investors and traders in the decisions that they make. Burton defines technical analysis as a study of stock market charts with the objective of determining how investors are likely to behave in the near future. In this chapter, Burton is strongly biased against technical analysis and he gives pertinent reasons for his reservations in relation to this analytical approach. Key among these reasons is his notion that technical analysis only works if the stock markets are 100% logical and display a high percentage of psychological rationality of their participants, conditions that he claims do not exist.
Burton further adds that the technical analysis approach of stock market trading does not out-perform the conventional buy-and-hold strategy which is synonymous with many investment plans. In this regard, the profits derived through this approach tend to be diminished by the prevailing transaction costs that exist in these markets. As a justification of his bias against this approach, Burton points out several studies that have proven that the past performance of stock markets cannot be used to foretell its future performance, through proven theories such as the Random Walk Theory. Such movements are perceived to be purely coincidental as opposed to being the result of market patterns.
According to Burton however, stock markets will from to time exhibit behavior which follows specific patterns, and the exploitation of these patterns by investors will from time to time result in profitable opportunities for these investors after they have paid the corresponding transaction costs. However, Burton points out that such patterns and price movements in the stock markets are most probably the result of coincidences and chances as opposed to the existence of fundamental factors. The process of identifying these patterns in the price movements is attributed to data mining by technical analysts and hence, holds no water according to Burton.
In this chapter, Burton also pokes holes into the rules and guidelines that have been proposed and are used by technical analysts in the process of their trading activities. A significant characteristic of these rules according to the chartists is the notion that their strict application will result in the identification of trading opportunities by the investors and traders who apply them. Accordingly, Burton argues that these rules are made to fit into a particular scenario as opposed to being founded on fundamental factors that justify and explain their operation. Therefore, technical analysts are always likely to find trading rules that they perceive to “work” under this stock trading analytical approach.
In line with the concept of technical analysis, Burton also delves into the trading strategy referred to as market timing. Under this approach, stock market traders and investors place buy and sell orders at specific points on the price charts which they believe will stop the prevailing trend and lead to a reversal, consequently gifting these traders with lucrative profit opportunities. In this regard, Burton emphasizes the need for investors and other market players to always ensure that they trade in line with the prevailing long term trend in a particular market or trading scenario. Burton further argues that market timing is a dangerous investing approach because it defies the prevailing long term trend and can result in massive losses for the concerned investors over time.
In this chapter, Burton revisits the buy-and-hold strategy and compares it to the technical analysis approach that has been proposed by various chartists in the last few decades. According to Burton, the buy-and-hold strategy is a long term trading approach which entails the buying or selling of securities in line with the prevailing long term trend and the subsequent holding of these securities by investors for extended periods of time, including decades. In this regard, Burton argues that this approach is generally as good and as profitable as any other technical analysis approach which may be in existence in the contemporary stock markets.
In terms of tax efficiency, Burton argues that technical analysis is an inefficient tax-related approach because it results in numerous buy and sell opportunities that portend small gains to the investor concerned. However, these small gains are usually taxed on the prevailing capital gains tax rate, and the existence of too many taxation liabilities to an investment portfolio is not an ideal characteristic of a good investment portfolio. As a result, the excessive taxation of such a portfolio may result in negative long term earnings of the portfolio in comparison to one that has fewer trades that portend larger gains and a relatively higher tax efficacy level over the long term.

Chapter 7: How Good is Fundamental analysis/

In chapter 7 of his book, A Random Walk Down Wall Street, Burton Makiel addresses the investment concept of fundamental analysis which is used by several stock market participants to analyze and determine the most ideal investment which should be included in their portfolios. According to Burton, fundamental analysis is the process in which the inert characteristics of a security as well as the micro and macro environment in which a business operates is analyzed with the objective of determining an appropriate price of the security in relation to its prevailing perceived market value.
Makiel adds that compared to technical analysis, fundamental analysis provides a stable and more logic-based platform in which the performance of a security can be analyzed and a determination of its future expected price ranges duly predicted. However, Burton cautions investors that the growth rate which a security experiences within a stipulated past period is not necessarily an indicator of its expected future performance. This discrepancy is attributed to the existence of unique unforeseeable aspects that may lead to the significant deviation of the stock price of a security from its current growth levels. In this regard, Burton notes that fundamental analysis does not necessarily imply a full proof model of analyzing and determining the performance of securities in a given market.
As a justification o this proposition, Burton cites a case study in which the performance of the stock held by two different types of investment firms were compared to each other to determine the viability of fundamental analytics in the decision-making process. In the first instance, the study compared the performance of the investment firm that had an investment banking relationship with the company`s that it recommended, while in the second instance, the performance of similar firms in the absence of the investment banking relationship was also analyzed in this chapter. The findings of the study indicate that the first group of investment firms significantly outperformed the second group, thereby giving weight to the importance and role of fundamental analysis in modern-day investment decisions.
In chapter seven of his book, Burton emphasizes that fundamental analysis is primarily reliant on the availability of relevant information relating to the internal as well as the external factors that affect the operations of a business entity. However, Burton also notes that his analytical process has been complicated by the implementation of the Sarbanes Oxley Act, which partly impeded the availability of information relating to the internal aspects of the company. In this regard, analysts are expected to verify the correctness of the information presented in the reports of the underlying firm`s view on the impact of how this information will influence its future performance.
Burton also attempts to objectively analyze the performance of mutual funds and other investment vehicles that entirely relied on fundamental analysis as the primary analytical tool in the investment decisions that were made relating to their portfolios. This performance of the mutual funds was compared to the long run performance of the S and P 500 Index for the purpose of this analysis. The finding of this review indicates that there is limited or no change in the performance of these mutual funds in regard to the extent to which they outperformed the Index over the long run. As a result of this analysis, Burton concludes that the past performance of these funds from a fundamental perspective is not necessarily an indicator of their future performance in comparison to the performance of the S and P 500 Index.
At this point in this chapter, Burton makes a somewhat controversial proposition when he says that fundamental analysis is not better than technical analysis in regards to its ability to enable investors achieve above-average returns when compared o the prevailing stock market indices. However, Burton is quick to add that fundamental analysis would most probably lead to higher and more accurate stock market returns for portfolios that entirely rely on this approach, when compared to those portfolios that rely purely on technical analysis.
In chapter 7 of his book, Burton draws a direct parallel between the strength of fundamental analysis as an appropriate analytical tool, and the existence of market efficiencies in the primary stock markets in which securities are traded. In this regard, Burton notes that there is strong evidence that proves that stock markets are essentially efficient on the basis of informational as well as asymmetrical aspects. However, the prevalence of various anomalies in these markets has resulted in diminishing of these market efficiencies to a large extent. As a result, a corresponding reliance on fundamental analysis in stock market environments that are partially efficient may result in inaccurate conclusions relating to the investments decisions that markets participants should make, going forward.
Despite this justifiable criticism of fundamental analysis as an investment approach in this chapter, Burton still strongly advocates for this approach as the most ideal option when it is compared to technical analysis. He notes that this approach is more accurate and based on logical arguments unlike the technical analytical approach. However, Burton adds that a significant drawback of the fundamental analysis approach is its susceptibility to random events that may result in inaccurate and inconclusive investment recommendations. These random events may include natural disasters, terrorist attacks and unfavorable government policies among many other similar occurrences that may take place in an investment macro environment.
Finally, Burton notes that the strength and reliability of the fundamental analysis approach of an entity`s financial characteristics can be severely affected by inaccurate data which may be provided by dubious individuals such as in the Enron case. The credibility of this data and information is also likely to be affected by human factors such as an emotional attachment to the data by the individuals responsible for its preparation and presentation, subsequently leading to inaccuracies. As a result Burton notes that the strength of fundamental analysis lies in the availability and access to this data by individuals and professionals, with the latter having an edge over the former in this regard.

Chapter 10: Behavioral Finance

In chapter 10 of the book A Random Walk Down Wall Street by Makiel Burton, the author introduces a new investment dimension which is rarely considered by investors and other market participants and stakeholders in their day-to-day activities. This concept is referred to a Behavioral Finance. According to Burton, Behavioral Finance is a study of how the emotional and cognitive perceptions and biases of individual market participants influence their rationality and behavior in the course of their activities. The extension of the impact of these biases and rationalities to the overall behavior of the markets is entirely referred to as Behavioral Finance according to Burton.
In relation to behavioral finance, Burton advocates for the application of one defining behavioral aspect which ultimately determines the success or failure of these participants in the specific security markets that they choose to participate in. This behavioral attribute is the application of common sense by the investors and market participants at all times in their activities. As a demonstration of the application of this principle, Burton advices investors to adopt a long term approach in their investment decisions if they seek to reap maximum benefits from their corresponding investment portfolios. However, Burton also cautions these investors that the long term investment horizon which they adopt must not be based purely on short term reversals or “hot’ stocks that may be appreciating in value without the support of any fundamental factors.
In this chapter, Burton controversially proposes that the Behavioral Finance perspective of the stock and security markets movements should replace the standard investments theories that have been floated around by many professionals since time immemorial Accordingly, Burton notes that the behavioral finance concept was developed by Daniel Kahneman and Amos Iversky as the ideal explanation of why security markets behave and act in the manner in which they do over both short and long run time frames. Consequently, Burton advocates for the ideology that Behavioral Finance is the only true theory which can help investors determine the future direction of stock markets in the different geographic jurisdictions across the world.
According to Burton, Behavioral Finance dictates that the behavior of markets across the globe is imprecise because the underlying market participants are irrational in the decisions and objectives that they pursue. This irrationality is primarily influenced by the emotional perspectives that these investors include in the trading and decisions that they make. As a result, these emotions tend to result in the clouding of the judgment of these individuals and the decisions they make can be attributed in the long run to myopia and their failure to perceive the investment markets in an objective rather than a subjective fashion. These emotions normally take the form of either positive emotions or negative tendencies within the mental psyche of these market participants.
Behavioral Finance according to Burton is a highly perceptive explanation of the reasons why investors and stock market participants act in the manner in which they do. Burton notes that the principle factor in the application of behavioral finance to contemporary investment markets is the realization that these perceptions and emotional irrationalities are fundamentally subconscious as opposed to being conscious in the minds of these investors. This assertion implies that in most instance, the ivetsors and market aparticipants affected by beahoarial fiancé are not aware that suh factors mya be playing thesemsleves out in teir minds. In many instaneces Burton notes that an interrogation of these market partiecipsnt s would reveal thatthey believe that they are fullky aarwe of the deciosns that they are making, yer the reality on the gorint is that this propostionis not rue.
According to Burton, there are four main factors tha affct and impacrt the rationality of theinevstors and maret paricipants within a given inve,at environment envirionment. The first factor is overconfidence. Accordng to Burton, Overcnfidence refers rto the market behvioyr where investor continue to hold on to a stock and pursae more holdings in it, purely on the bais that the price is rising an d not on the bais of verifable funadameta factors. Consequently, overconfident invetsors and markeyyt particpaints bleieb that tey are sure of heir deciosn based on the positive rally oftheit holdeings, yet this paerforamnce may be based on factos that renot known to these invesors.
The second influencing factor that characterizes ebahavoral fianace is biased judegemts thatremade by the inevstors and market particpants in their invemsntdeciosns. Thse bisaaed judgemant as re mainlytarributed to emotional attachemnts that theee participants may haveto certain stocks or securities that are sold in amarket. Asaresult, the decions that they amake are highky subjective and based on these meotions thereby clouding theuir ability to see pertinenred flags that may be prevalent in the securities and other invetsments thatthey chose to include in their portfolios for the long run.
Acordingto Burton, the tird factor whih characterizes the baghavioral finace aspects of inveing is herd maenatkity. Thi sfactr is described as the making of invtsmet deciosn by aninvertror of r market particpnat on he basis of what other inevstors and market aprticpants are doing, as oppseed to funademantakl logc and knowledge. Herd mentality normally palys itself out in the stocj market during times of sustained bullruns and capital apreciatin according to Burton. During sush times, a goodnumber of icbtors and market paritpact wikl base their deciosn to buy simpaly on the fact that other invetsors ahhve significant bought certain shares and vice verasa.
Fiurtky, loss aversion is the other beahivoral fiancé characteristic that significantly impavts the deciosn of inevsor amd markets participants in te comtemary trading and invemet environment currently at play. This factor afftcs as maller percentage of invetsros, thoug it tends toplay isel out more durig times of depreseed economic activity nd sustained bear runs. The affected investor tend to make decisions that are gered towards prebventing the loss of their ivetsment income at all costs. As aresult of this concservative approach to invetsoing, agood number of theesmarket particpants and oinvetsors tend to miss out onprevialing opportunities in the market, subsequentky leading to the lackluster pereformance f their inevent portfolios.
Burton summarizes the Behavioral Finace dynamic as beingprimarily characterized y two overriding emotions. The first emotionis fear, while the secod emotion is greed. In most intsnaces,fear plays s out when invetsrosr are afraid ogf losing ther capaital and sunsbqetently make deciosna thatare gerad towards enusreng het their caitalis protectd. AS aresult, behavural factors such as loss svaersion are lergeky associated wuirth this emotionwithi the beahaviral fianace realm. Gred on the oterhand is amanifetsed in the desame decuosn that are made by the invetsr but with a primary motivetin of acquieing more wealth at whaterver cost. As aresult, behavioral fianace tenadacies such as the herd mentality and overcondifence aasscited wit this emotion.

Chapter 11: Pot Shots at Efficient Market Theory

In Chapter 11 of his book, A Random Walk Down Wall Street, Makiel Burton reviewsand interrogates the Efficent Market Thery which has been floated in many convetional financial nformaion sources, and which is believed to be constantly in play in thecontemposrary securitymarkets. According to Burton, the Effiecint Mraket Theory state sthat all information and other pertinent factors relating to the a seciurity is duly refleted in te security`s current trading price. Consequently, Burton adds that there are three levesl of he Effiecuent Martkey yTheory. Tes levels are thestrong form vereion, the weak vereion and the semi-strong formversins of the theory.
In line with the theory of effeicuent market hypothees, Buryon advocate for the investment in valuestcks by maret partciplt who hope to realize substantial gains over a longetrm investment duration. Burton defines value stockas as the share sof company`s wthat have maytured and stailized in terms of theisr core operationa characteristcs such as their cost functions and net sales propositions. The vouching for this category f invetsments by Burton I sbasd on the interplay of teir funademntal factrs with thexistance of the effeicnt market theory. In this regard, the existence of this teory guarntees that the stco price valueation of this dshars reflected by their market is atrue indicator of therela financial value that these securite portend, and insetors can expect to reap hansdocme rewards by rucahsing them.
In this chapter, Burton alos highligts evience which has been collected and proven to go against the fundamenta tenets of the Effiecint Market Hypothesis. In this egard,Burton specifically dispel the January effect which is associated with the ffiecin t Mrket Theory as not being founde on stck mart fundamentsla. Aciording to the January effect, stok prices tend to ibn value towards the end of the year as investor cash in on teir postins for te holidays.However, the stock markets tjen faces areversla in the new year as stock prices gradyaully rise in the first weeks of the new year.
Burton also critiques the associtionof short tem price momentims in the secuitiy marets to the exostance of the Effiecinet Mraket Hypotesi by claiing that no eveidence exist in relation to thse two variables. Key among the short term momentums tha t Burton quetsins inthis cahpater is the perception that weeks of positive gains in stock markets are lkely to be followe by eeks of positive gains and vice veersa. This short term momentum together with the HJnauary effect have been largely attributed to the Effiecint Mraket Hypotses. Hoewbver,Burton dispels this ovcurences as being econmicamly unsustainable afyer the cirrespodingtrabscation costs and capital gains taxeds have been decuted.
In regrdsato the relationship between long term stock maomntums with the Effiecint Market Hypotheseis , Burton in his chapter ttriubutes this close correlation to te existence of a reactionary environment to the lrevailing interts rates as being the key drivers of tis close correliation. Burton frther asserts that long term mometums and rendmoents are liey to dipslya the close correlaition wit Effiecnt Maret Teory and lead to an increase in potential returns from these invstemnt. Burton notes that the association of hort tem momentum trends with the ffeicnet market theory is not only unsustainable but also adds that susch an invesmet approach by te market paricipants s unlikely to result in higher returns than a convention buy-and-hold strategy.
In cahater 11 of the book, NMakeilButon further advocates for the ealtionship between the long term momentum trend with the Effiecinet Market GHypothesis. In thios regard, Butrton notesthat the existence of this elationsghip may impy that the prevailing stockprices jn aparticular market are most likey reverting back to their mean values, andhncethe Efficient Market Theory can be uasd in market correction of stock prices that were previously over=preced due to aggressive buying activirties by thse inveors. As aesult, Burton notes thatthis approach to the anlayis of stock pmarey privces and activity can be beneficial if it use in combination with afunadmetal value approach such as a value inveysing.
Burton also dscusss other criticall aspecs of invetsing in the stocjk market in this chapter. Acordingly, Burton advocates for the adoption of an invetsmet strategy that is mre focuessd on small-cap stocks as opposed to shars that arecharacterized by large cpatalizations. According to Burton,the adoption of this treatgey portmneds higher higher retirns if these sticks are held for the long term, primarily due to the value stock nature of these securities. However, Burton auctions that thei approach can be percievd as aconservative invemtment strategy. Therefore, it may not be sutable f investor wjos eek to realize above –average risk-adjsuted returns n the long run.
Acording to VBurton, stdies that have previosty been conducted indicate that low preicto eraings raton acan have a variety of imlicatins an dmeaninfg o invetsors and interesd stock market particiats. On on hand, these studies have indcatd that such stocks if held for the longruncna result in the ralizaion of above-average risk adjuted retirsn for the invstorwho hold them. On the other hand,Burton notes that lowpreic to eranings ratios are oten asscoayed wwith with nehgativefunadametal characyteristics of their undelying compnies, since they depict a scenario where tecompany is nit signidficantly generating enough value based on its percievedmarket price. In this regard, convential investment knowekdge diactates that such companies should be avaoid until their financial fundametalsdratcally imrove.
Urton further etcnds thedebate on the low price to eranings ratio implications on ficail marets insvetrs an dpartivcpants. In ths regard, Burton arues that wheras a low preice to eraninfs ratio can bae apercievd as anegativeindicator of the growth prspects of ac ompany, it should be notedthat thse ratiomaty be absed on prevail short term adverse financial occurebces in accompany. Thse coccurences may result in aperiod of negative stunted growth of te company`s revenues eadding to alow privce to eranings valuetaion. Consequently, incvetsor and ficail market participants must intergotae the facial spects of a company t geryminwjethr the low price to eranings ration is reflcton of iehr the long term, or shortem groth rosecto f acopany going frwad.
In conclusing this chapter, Burton advises invetors and security market prticipants to daopt stretgies that wil lead to the realization of abaove avrega sriska djeusted eturns. Burton notes that these tratfies may imply higer risks profile and may nit beusitable for uinvetsors wth arelkativeluy short invetmtduration mind frame. Thse investor may include retirement plans and pebsionschmes for senior citizens and invetsors. However, this srateies may work well fo relatively yunfder investorssinec they havethetie to recioup nay losses they might incur asthey pursue the said agrreeibve ivsetment stragies, both in the shot and long run.

Chapter 14: Life Cyce Guide

In chapter 14 of his book, A rando Wlk Down Wall Street, Burtin gives ractical insght and advice which can be used byboth novice and proffesiion investors in the pursuit of their investment goals and objectives going forwads. This chapter acs a s guide that details the ley aspects that should be consired by the investor in ensuring that they create9invetsment portfolisathat are proitibale and sustinavbe both in the long an in the short run. The investment adbvice that Burton give sin this books acyst a s aummary of the overall gfindings, conclsion and propostion that he has studied and formulated through the book, right from the brging to its end
The fisrt invetsmnt advice ethatt Burton gives in this chapter is the exlantion of the realtion btween riuy invstemntsand corresponding toime horizons. In this regard, Burton advanes the idea that the shorter the time frame for a particular invemst alternative, the higher the corrspeonding return. However,.Burtom alaos notes that the higher potential return implies that such investment will most likely imly higher risj profiles, and they subsequntky nay nit be ideal for investor with alow risk appetites. Tgerefore, Burton advices invetsors to onvets in risky seurites only if theuir investment horizon execedd s ten years. Short nvement duration shpul vbe charcateried buy less risky invemnt profiles of the secures tat are contained in a given portfolio.
In regards to invetsors who have a srelatibevly short investment horizon mainly due to their corresponding ages, Burton advicates for the consideration of making an investment in a tared retirement fund as aviable option in the ong run. Accordingly, du eto the limited toiem horizon that such investor shave in their inevstemnt policy dicunts, Burton empahaszes the impoatynace of diversficaytion ofsuch portfolis as opoosed to the realinc eon riky assets for the overall attainment of the gials and objectives of this policy statement. By diversifiying their invetsmets, Burton concludes that the investor swil have seucseded n spradingthe risk across non-related and noncorelated asset classes.
As prevusul tmnetioned, Burton ideintifis diversification as aimprtant copoent in te succesfu creation and constitution of invetsmet portfolis that rae expected to neet their owner`s objecties and goals. Owever, Burton also addsa that diversified investment portfilos ar not areseve of inveosr amd market participant stha have limited invesmenduration. Burtim argues that invetsors whose profiles are relatively longer term acan alos adpt and tap into ye benefits carruing from the diversification strage. He stranlfy adipvactae sforthe comaniunyyion of the dievserfication approach with a riy investment profile as being and idela vaneu theoroygw hich invetsors can be able to realze both shoet as well as long term above averaer risk –adjusyed returns.
Burton mephaizez the impoarance of thediversofcation approach to both long tern and short term ainveytsor as thekey ingrident to the realization of superior returmsn on their portfolio both in te short and the long run. Burton streses that the main detrminat of the success of an invetsmet portfolio is the strength of its allocation ctriresa. In this regard, Burton assers tha90% of the sucsse of a portfolio lies in the sepecifc divesridfcatin decisona that are mafde relating to assets that it will hold. In this regard, Burton advices invsteor to distribute thewelath beween different ase clases such as rell estate, stocks, bonds and liquid casjh among manyother suitable laternatives.
According t Burton, there are five main prineciples of asset allocation that invetsros and stock market participants must beain mind in their furture inevstemnt allocation decisions. The first prnceiple is therelationshipbetween the perceived risk of an investment, and the correposnding return aasscoited with. In this regard, te funadamental propstion that guides this relatuons is that the higher therisk impie by a potetila invetsmen assets, the higher te corrrrepsonding retrn ascoiated with the investment. HoweverBurton adds that this pecived risk can be partially mitigated by extndeing the investment udartionof the undrying asset class in question. This would enable trealization of te sxpected returns on inbeysment based on the given riskprofile in an ideal and apppariate fahion.
As previously mentined, the extance of a rik to return relationship isultimately affected by the correposnding dutation of the invetsmet asset calss under consideration for investment in aprotflio. Thegenarla consensus in this regard is that sorter toem frams imply higher rsk profiles and corresponding higher returnprospects. Burtonhowever,cautions investor on ther capacity to jhandle scertain perceived incve,rt options that ,maore portned higher returns wihin a given finacila duration.In this rerd,Burton advices investor to include asset calsess that they can easiy relate to and which they accordginly understand sthis is a fundmaetaldetrminat of hoew ell such assets will work in the atinemnt of the inevme goals and objectives of the concerned investment.
Thordly, Burton introducs the concept of dollar cort acvaragung as afunademtala aspect of the asset asllocaton decisona nd privciples ha are mmade by invetors. Accordingly, Burton advices invetors that Dlllar Cost Averaging can result in the significant reduction of the risls aasocited in inetsin in stocks and bonds. Saresult, Invetsors are advied to adoprt and employe strategies and tactics that maximize the perceived benfit of dollar cost avargaingin their portfolios. Consequently, the overall is of such portfolio will significantly be reducrd and diversified going fowrd.
Fourthly, Burton also strongly adivactas for the reabaloancing of the portfolio of the underslying invsetosrso ast osui the ebver-changing nature of finical markets across the globe. Rebalaoncing of paortfoli according to Burton refrs to the rocess through which the constituet assets contained in aprorgdli are cntinously evaluated to determive their average return a nd overall correation with oneanother. Due to changing marets conditions of th econpomy, iys coccasionally necessary for ta prorfoli rtoobe rebavlanced s that it can incleasset ath atre perceived favoravbel at a given pit in tiem Accodingly, rebalanceing also enavle the investor sto eleoimatae sset sclaese sthat be underperforming, ow whose correlation with the other existing asset classes in the portfilo may be too close to the etent that both unsystemi and systemic risk is not accordingly deievsifed.
Fnally, Burton advices invetsior to critically analyze themselves and etrmeni wether they are able to distinguish between thjeir capacity for thesxting , andtheir corresponding attitude towards thisrisk. Cpacity for risk refers to the ability of an inventmeyt portfolio to hande a stipulated amount of rsi, without being adversely affected in the event that unfoavrabke maret conditions play out. Attitude twords risk o the other hand refrs to the ercieved passion or likeability that an investor ahs for aprtibular investment clas,and thecorreposnding risk that it portends. The ability of an invetseor to accordingly identify and distinguish these two risk concepts in thei portfolis will go alonh way in dermining wethet their investment objectives and gols will be realized going fprward.

This paer has critically reviwed five chapters of the book “ A Random Walk Down Wall Street” by Burton malkiel, which was written in 2012. This particular book is the 10th edition of the pub;icatoion, with the first edition having been authored in 1973. In this bok reviw, the chapeters that have been focciussed on entail significant aspects of the ideas, propositions and assertison that the author has put across as being the oviring theme in his book.
The review ha focussde on the cahpater which talks avbout technical analysis, where the definition, component and faesiblity of thius apprch in the eyes of the author has been discyussed. The booke has alos addressed the fundamental analsyis aspect of the trading and invetsemnt practices of tackmaret participants, as well as various other apsects conatine in the book. I closing, the comprehensive review contained in this paper gives nain-dpth insight into the main ideas tha Burton Markiel proposes isn his book to his targtted audience.