Market Consistency and WMC [6]

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Bullet points include: Tries to identify whether a security is ‘cheap’ (or ‘dear’). Compares own assessment of what security is ‘truly’ worth with market price. Buys or sells depending on sign of difference, if difference large enough. Hopes market’s view moves closer to his or her view (and quickly enough not to be forced to abandon position in the meantime). Deliberately aims to favour one party (i.e. the firm’s clients) at the expense of some others (i.e. other investors). Outcome is uncertain. Not everyone has the same investment view. Indeed, views need to vary for an active market to exist. Clients can’t (typically) sue the manager merely for making a wrong investment call, unless some other culpability is established

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