The Role of Economists in Investment Research

by David Jenyns on October 20, 2008

Investment companies use a number of different ways to cut the costs of research, and these cost cutting measures are becoming increasingly popular.

One group of investment companies uses the services of a company that serves all the funds in the group. Another investment company has, for some years, employed an advisory council to make recommendations. Decisions are made by the board of directors.

A perceptive economist can undoubtedly be useful in the management of investment funds. His function is not to judge individual securities. It has taken some time for investment company managers and security analysts to realize that economists are not “too theoretical” in their approach. Some investment companies are devoted to the committee method of decision; they believe that no single person is competent to weigh all the factors that enter into a decision and that committee participation reduces the likelihood of error. Other companies allow individuals to assume primary responsibility for such decisions.

Judgment cannot be gained from books.

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