Japa International





Japa International investment philosophy is based on the principle that we should:

 1) devise successful strategies that should provide positive expectations and,

 2) invest the right amount of money to increase wealth and to limit losses.

Much has been written about efficient markets and modern portfolio theory developed by Harry Markovitz in the 50s. Eugene Fama's random walk theory even asserts that price movements will not follow any pattern or trends and that past price movements cannot be used to predict future price movements. 

Traditional financial market theories (CAPM) are based on the assumption that the market participants are rational.  Markets are believed to be efficient and as such at any given time, security prices reflect all information.  In other words, expecting a profit in the buying or selling of securities is a matter of chance not skill. However, investors like Warren Buffett do exist.

Investors are not rational. Investors tend to be over-confident or under-confident depending on the circumstances, and tend to over or under-react to events.  Behavioral finance, developed in the 70s, inquires into the irrational behavior of investors and attempts to structure the observations to formulate explanatory theories and to postulate decision. 

Active management (seeking alpha) is believing that there could be discrepancies in, (price) expectations and/or investors’ risk preferences and acting on it.