Linkfest:May 13,2016

Some stuff I am reading today morning:

Nifty Corporate Earnings Analysis Q4|2016 (Sana Securities)

How much dumb luck it takes to become a Billionaire (Marketwatch)

Liquidity,Spread and ETF (Prashanth)

Edelweiss’s Midcap Marvels (ET)

Monsoon may arrive early this year (Mint)

Most large cap funds give 1 year negative returns (BS)

Gold:The Charts don’t lie (DR)

Oil Prices:The next 25 years (Climateer)

Combating old age (Subramoney)

Rahul Gandhi emerges as threat to Modi (Bloomberg)

2 replies on “Linkfest:May 13,2016”


The blog post by Sana Securities highlights the hindsight bias (or post hoc analysis, I do not know the right jargon) in Nifty changes that leads us to believe that Nifty growth is higher than it actually is. This is highlighted well by the addition of Eicher Motors in the Nifty from April this year. Eicher has been on a roll so far both on profit growth and on stock price growth. As a result when you compare Nifty growth which now contains a stock that has done exceptionally well in the last 3 quarters of FY 16, and in the past few years; and likely to do well in Q4 FY 16, it is going to show a big lift for Nifty Y-o-Y. That is because Nifty has (a) added a big performer in Q1 FY 17 (before it announced Q4 FY 16 results), and it’s known performance for 3 quarters of FY 16 will have the benefit of hindsight, and (b) removed laggards following a similar logic.

Consequently, Nifty will show a premeditated higher Y-o-Y growth in FY 16, because results of 3 quarters of FY 16 were known to Nifty when it made changes to the portfolio. I tried (quite unsuccessfuly I should say) to highlight this with my alphaideas piece on titled ‘Anchor rate of Eaarnings Growth’


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