Nearly 60 years ago, the late C. M. Douglas F.F.A. published a classical paper “The Statistical Groundwork of Investment Policy” (T.F.A. 12 p.173).

The main policy consideration, discussed by Douglas, was the extent to which offices should invest in equities. He maintained that funds should only be invested in equities if greater security was therefore obtained. From a study of index numbers covering the period 1924-28 Douglas concluded that share prices were related to the level of business activity i.e. to the progress of the ‘Trade Cycle’; equity prices following the cycle directly, the debenture prices following the cycle inversely, but with a different tempo and interval. If, therefore, an investor could judge the future trend of business activity, a sound investment policy could be pursued.