Rice Money Managers, Inc.

Our Philosophy: How Markets Work

Many money managers consider two academic theories about the stock market, the Efficient Market Hypothesis and the Random Walk Hypothesis, as absolute, complete and unqualified truths, so that the investor need know nothing else to be as successful as possible.

Rice Money Managers considers that these theories are only fragmentary, partial truths.  They are insights into facets of a very complex reality that will never be reduced a few simplistic equations.  Because we take a broader and less rigid view of the underlying forces at work in the market, we believe that our management can add value for clients in a variety of investment situations.

Millions of Americans have paid trillions too much for stock in thousands of companies, a condition Efficient Market teaches is nearly impossible.  Markets price can be wildly wrong, both too high and too low.  The psychology of mob behavior historically has been considered a useful subject for serious stock investors.  The book, Extraordinary Popular Delusions and the Madness of Crowds, is an example of such a study.

However, neither does Rice Money Managers consider Efficient Market to be total nonsense.  The market often does a pretty good job of pricing securities fairly, but it does not always do so.  The markets are more like a competitive game than a cooperative effort at scientific pricing of securities.  Caveat emptor!

According to a study a few years ago, people who are successful in a variety of life situations are often too optimistic about how they are doing.  Many investors tend to overestimate how they are doing compared to market and compared to their risk level.  Efficient Market is a worthwhile caution against overconfidence, especially in concentrated, non-diversified portfolios.

Rice Money Managers offers a Management Service service in which it endeavors to help clients deal with the complex reality. 

Copyright © 2002 Rice Money Managers, Inc.