A great post on the Ritholtz blog. It says that Jeremy Siegel essentially committed academic fraud by using erroneous data which reached to the wrong conclusion that equities have been better investments than bonds. This data was then included as fact in the college education of thousands for decades.

I would wonder if he was paid off to falsify his thesis data?

http://www.ritholtz.com/blog/2012/08/bon....

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By artificially goosing equity return data for the 19th century, Siegel may very well has made equities over-owned in the 20th century.

Consider what this error means for traditional investors: The vast majority of classically educated MBAs and Economists have a very significant flaw in their investing assumptions. Imagine how many fund managers are running 100s of billions of dollars using this error as the basis for their money management.

They are sheeple, not investors

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The tenacity of bad ideas is quite astounding. Just because something is wrong, and verifiably so, does not seem to have much immediate impact. It remains a stable of academia, as well as the actual practice of investing investing — despite its questionable truth. We should not be surprised at this. Recall what Max Planck — who won a Nobel Prize for Physics in 1918 for originating quantum theory — famously said: “Truth never triumphs — its opponents just die out. Science advances one funeral at a time.”

how interesting...

but you are right as well

dippy will still be dippy

buy and holders will still never look at their statements while suzie orman sells them her own branded debit card

"Siegel" = Fraud

say it ain't so Alice

A serious research error, for sure.
Fraud ... that might be stretching things.

The problem concerns survivorship bias.

Anyone that tries to examine historical data for indices faces serious issues dealing with the fact that companies come and go, or merge.

The Dow today isn't remotely similar in composition to what was in it in the 20s and 30s. Doesn't stop people from drawing charts etc, as if that wasn't the case, and instead as if they were tracking apples to apples.

Now, if this issue was presented to him and ignored .. different story.
But market history from the 19th C, especially the first half of the 19th C where this problem allegedly occurred, isn't exactly easy to work with.

And from my quick read on the article earlier, this involves 40yrs out of 200.
Fraud seems like a stretch.

Whether Siegel committed fraud or not it is amazing that the "Siegel Constant" has survived as long as it has. There are two possible explanations: There is absolutely no sense of discernment to be found and/or the market is more than happy to continue defrauding equity investors. Yep, the correct answer is both.

Long term errors like this have occurred and then been repeated.

-Domestic violence increases during Super Bowls.
-Spinach is good for you. This was based upon confusing dry and raw canned nutrient levels of iron.

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Now, if this issue was presented to him and ignored .. different story.

When an individual within the industry enters the public domain by writing then teaching with a book based on research that is later criticized by many in the industry as flawed, then on the FOURTH EDITION of the text has not even tried to fully address those criticisms or comments from peers in the industry, the press and academia, if only even to dismiss them, something's not right.

At best, this is a potential long term error for which an academic author would at least present a research paper outlining the exposure to his conclusions if his data were incorrect, the criticisms and the true historical record with the parameters from the data from which he then reached these conclusions.

As you aptly stated, the data before the 20th century can be seen as problematic, if not missing. So why not admit it as a pedagogical point to be researched and understood with its risks associated and introduce a margin of error in which to couch the conclusions? The problem is that the book (I have only Editions 1-3, mind you) appears to be IMHO as the work of an answer being justified by selectively chosen data.

It would cost him and Penn little to assign some eager graduate students this task as a research project, yet at this time to date I have found no evidence of this. IMHO, the silence from Wharton and the author speak volumes in the face of adverse industry peer comments and analysis.

Correct me if I am wrong, please show me research documents other than the government and investment industry sources he used supporting the validity of and accuracy the data presented by the book as undeniable fact.