David Dodd : biography
David LeFevre Dodd (August 23, 1895 – September 18, 1988) was an American educator, financial analyst, author, economist, professional investor, and in his student years, a ' of, and as a postgraduate, close colleague of Benjamin Graham at Columbia Business School.
The Wall Street Crash of 1929 (Black Thursday) almost wiped out Graham, who had started teaching the year before at his alma mater, Columbia. The crash inspired Graham to search for a more conservative, safer way to invest. Graham agreed to teach with the stipulation that someone take notes. Dodd, then a young instructor at Columbia, volunteered. Those transcriptions served as the basis for a 1934 book Security Analysis, which galvanized the concept of value investing. It is the longest running investment text ever published.Janet Celesta Lowe, Value Investing Made Easy, McGraw-Hill (1996)
Dodd's residence (1950s - 60s): 39 Claremont Avenue (down the street from [[Juilliard's former home), Morningside Heights (2006 photo)]]
Dodd was a member of the following organizations: American Economic Association, Social Science Research Council (investment committee 1950–1956), American Finance Association (Vice President 1946–1947), , Beta Gamma Sigma, Phi Gamma Delta, Alpha Kappa Psi, and Phi Chi Theta.
The phrases "Graham and Dodd," "value investing," "margin of safety," and "intrinsic value" — all biblical to value investors — are often used interchangeably when referring to an approach to investing. Despite the onset of modern portfolio theory (MPT) in the late 1950s — a theory that peaked throughout the 80s, gaining Nobel recognition in 1990 (co-laureates: Harry Markowitz, Merton Miller, William F. Sharpe) — Value Investing proved to be a formidable style that sharply defied MPT. The University of Chicago was at the center of MPT (see "quantitative analyst") while Columbia has been the Mecca for Value Investing for 7½ decades. Many cracks in MPT are now well established, whereas the basics behind Graham & Dodd’s approach to Value Investing are as valid today as when they were first introduced.
Value Investors see securities as either priced correctly, under-priced, or over-priced. In contrast, MPT proponents insist that, by definition under the efficient market hypothesis, a realized price of a stock is the correct price. Value investor purists reject the usefulness of Capital Asset Pricing Model (CAPM), in part, because it wrongly extrapolates historical volatility as a proxy for risk. For example, if equity prices of a company fell 75%, assuming the underlying fundamentals of the company were solid, an MPT practitioner would view it as volatile (risky); whereas, a value investor would determine whether it was undervalued, and, if so, buy it reasoning, among other things, that the resulting downward risk is less than before. Therefore, value investors see MPT metrics — such as standard deviation, beta (relative standard deviation), alpha (excess return), and the Sharpe ratio (risk adjusted return) — as inadequate and even misleading.
Columbia resisted de-emphasizing Value Investing during the throes of the MPT renaissance, but the appeal of MPT seemed to be part of a larger movement, thrusting finance aspects of business education into higher echelons of academia. During about a 25-year period (1965–90), published research and articles in leading journals of the value ilk were few. Warren Buffett once commented, "You couldn't advance in a finance department in this country unless you taught that the world was flat."Joseph Nocera, The Heresy That Made Them Rich, The New York Times, October 29, 2005 Shortly after the death of David Dodd in 1988, Bruce Greenwald, a star professor at CBS, took a keen interest in Value Investing. He found the overwhelming success of Value investors difficult to dismiss. At the same time, reliable data that fortified Value Investing was solidifying, while MPT was showing some flaws. Professor Greenwald invigorated the academic aspects of what many in ivory towers erstwhile treated as a vocational discipline.
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