ALFRED COWLES BRD 315 doubtful we assumed that he abstained from trading When bullish it as assumed that he bought equal dollar amounts of the stocks in cluded in the Dow Jones railroad and industrial averages, and sold them only when he became bearish or doubtful. when bearish we as- sumed that he sold short equal dollar amounts of these stocks and covered only when he became doubtful or bullish. The percentage gain or loss on each such transaction has been calculated, and the results impounded through the 26 years. Since the Dow Jones averages have only recently been corrected to offset the effect of stock rights, stock dividends, and stock splits, such adjustments have been made for all the previous years on the basis of tables published by Dwight, C. Rose in his book Investment Management. Corrections have also been made to allow for the effect of brokerage charges, cash dividends, and the interest presumably earned by Hamilton's funds when they were not in the stock market. The fully adjusted figures were then reduced to an effective annual rate of gain which is presented as a measure of the esult accomplished From December 1903 to December 1929, Hamilton, through the ap. plication of his forecasts to the stocks composing the dow Jones in dustrial averages, would have earned a return, including dividend and interest income, of 12 per cent per annum. In the same period the stocks composing the industrial averages showed a return of 15.5 per cent per annum. Hamilton therefore failed by an appreciable margin to gain as much through his forecasting as he would have made by a continuous outright investment in the stocks composing the industrial averages. He exceeded by a wide margin, however, a supposedly nor- mal investment return of about 5 per cent. Applying his forecasts to the stocks composing the Dow Jones railroad averages, the result is an annual gain of 5.7 per cent while the railroad averages themselves show a return of 7.7 per cent. Hamilton was long of stocks 55 per cent, short 16 per cent, and out of the market 29 per cent, of the 26 years under review. Counting only changes of position, he made bullish forecasts 29 times. applying these to the industrial averages, 16 were profitable, 13 unprofitable. He an- nounced bearish forecasts 23 times, 10 were profitable, 13 unprofitable He advised 38 times that funds be withdrawn from the stock market 19 of these withdrawals being profitable, 19 unprofitable. In all, 45 of his changes of position were unsuccessful, 45 successful. The applica tion of the forecasts to the railroad averages confirms these conclusiong cept that in this case 41 changes of position were successful and 49 unsuccessful. For the period from 1909 to 1914 inclusive when the ir dustrial averages displayed what, in effect, was a horizontal trend, his hypothetical fund shrank 7.8 per cent per annum below what, it would