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Hi. I am reading "A Random Walk Down Wall Street" by Burton G. Malkiel right now and so far I have found it to be very interesting.
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It is interesting, but also wrong.
Start here for the counter-argument.
http://www.pupress.princeton.edu/books/lo/
This is not a "pop" book, but is worth reading anyway if you have any kind of mathematical background.
eastbay
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i used to be a staunch malkiel hater until i started doing research into transactions costs ... he seems to consider their impact on actual portfolio returns more than his detractors. Note that "random walk" doesn't aggree with the strictest version of the efficient markets hypothesis, but supports the hypothesis that beating the market is very hard to do and unlikely to be achieved by the average investor. From a paper co-written by one of the authors of your book:
"Such costs – often called ‘execution costs’ because they are associated with the execution of investment strategies – include commissions, bid/ask spreads, opportunity costs of waiting, and price impact from trading (see Loeb, 1983 and Wagner, 1993 for further discussion), and they can have a substantial impact on investment performance. For example, Perold (1988) observes that a hypothetical or ‘paper’ portfolio constructed according to the Value Line rankings outperforms the market by almost 20% per year during the period from 1965 to 1986, whereas the actual portfolio – the Value Line Fund – outperformed the market by only 2.5% per year, the difference arising from execution costs. This 'implementation shortfall’ is surprisingly large and underscores the importance of execution-cost control, particularly for institutional investors whose trades often comprise a large fraction of the average daily volume of many stocks." (Bertsimas, D. & Lo, A. W. (1998), ‘Optimal control of execution costs’, Journal of Financial Markets pp. 1–50.)