Subject:  10/9/96--What Works on Wall St.
Author:  MercBW
Uploaded By:  MercBW
Date:  10/13/1996

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BUSINESS WEEK ONLINE
Transcript of Oct. 9, 1996, conference

THE BEST INVESTMENT STRATEGIES

James P. O'Shaughnessy is the author of a new McGraw-Hill book, "What Works on Wall Street," which tells what investment strategy works best, based on study of 40 years of stock-market data. Jim is president of O'Shaughnessy Capital Management. He was online with Fred Jespersen, Scoreboards editor of BW.

Here's a sample from the transcript:
JackBW:  Next...
Question:  What was the biggest surprise that came out of your research for this book?

OCMInc:  That the small-cap effect owes almost all of its performance advantage to so-called micro-cap stocks (those with caps below $25 million). $10,000 invested in 1951 in those micro-caps zoomed to over $29 million by the end of 1994. The problem is, you really can't buy these tiny stocks. Market impact and other bid-ask distortions would have a huge impact on your profits. Yet, most studies fail to remove these stocks. When you look at just those stocks investors can really own, the difference between large and small is much smaller.