Past performance is no predictor of future success. But that was not always the case.
Every advertisement for an investment product, whether online, or on a bus, or anywhere else, will have some version of the following disclaimer: past performance may not be indicative of future results.
But in the 1960s, it was widely believed that past performance was a useful way of analysing what would happen in the future, at least, according to MG Hall, who wrote, in his May 1963 Investment Analysis paper, that many stockbrokers, financial journalists, economics, and investors believed that past performance was a guide to future growth. Hall was examining the work of another paper written by I M D Little, which attempted to debunk this myth.
He attempted to empirically examine and question the role of past performance, and concluded that companies with poor past records and high yields may well represent the most attractive investments available, because they had ‘nothing to lose’ and everything to gain.
