Academics Confirm That Buffett's Success Is No Mystery

Buffett's success as an investor has often befuddled academics. Is he the luckiest man in the world? Nassim Nicholas Taleb, in saying that he would choose George Soros over Buffett as an investor, has said, "I am not saying Buffett isn't as good as Soros. I am saying that the probability Soros's returns come from randomness is much smaller because he did almost everything: he bought currencies, he sold currencies, he did arbitrages. He made a lot more decisions. Buffett followed a strategy to buy companies that had a certain earnings profile, and it worked for him. There is a lot more luck involved in this strategy. "

But a new academic study does make it sound like skill has had a lot to do with Buffett's success as an investor. The study is entitled "Buffett's Alpha," by Andrea Frazzini, David Kabiller, and Lasse H. Pedersen (2013). They state that: "The standard academic factors that capture the market, size, value, and momentum premia cannot explain Buffett's performance so it has to date been a mystery." The authors then go on to demystify it. I would suggest that anyone who has simply listened to what Buffett has been saying for years would not have found his success a mystery, but now it has the imprimatur of academic rigor.

Source: Seeking Alpha

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