Here are some recent interesting posts from the MoneyBlogNetwork and beyond as well as a list of the carnivals Free Money Finance was in this week and my posts that were included: Consumerism Commentary lists a stupid financial mistake. AllFinancialMat…

Since the premise of the book is that ROC is a key indicator of stock performance, it is understandable that one might simply opt for a small minimum (perhaps to eliminate illiquid securities) and then simply select those with the very highest ROC. But my guess is that since there are so many more small-cap stocks than large-cap stocks, and because financial ratios and so forth of small-caps tend to have much wider ranges than large caps, it probably means that if you chose almost any single selection criterion (e.g. ROC or most anything else) and then applied it across the entire spectrum of equities and then only chose the top 10 or 20…well, you would probably inevitably end up with mostly small caps.

I’m also concerned that the 2007 performance of the portfolio looks quite bimodal. If you removed the three mining stocks — FCX, FDG, and PCU — the portfolio would be down almost 25% for the year.

On the other hand, the author of the book would claim that short-term performance is irrelevant and that, in fact, short-term and medium-term underperformance is why the system will continue to work in the long run. In other words, extended bouts of medium-term underperformance will guarantee that most adherents will eventually dismiss the “formula”, and thus the (claimed) excess return will never be arbed away.