The Efficient Market Hypothesis, Fact Or Fiction? Part 4
Today concludes our four-part series on the efficient market hypothesis. While the EMH helps us understand how markets work, in terms of investment strategy it really doesn’t matter whether markets are efficient or not. The only thing that really matters is whether...
Do Dividends Lower Stock Prices?
There are many investors who have a hard time accepting the fact that when a company pays a dividend the payment results in a permanent relatively lower price (relative to what the price would have been the dividend had not been paid),...
May, The Silly Season, Is Upon Us
One of the more persistent investment myths is that the winning strategy is to sell stocks in May and wait to buy back until November. While it is true that stocks have provided greater returns from November through April than...
Value Premium And Distress Risk
While there are many studies demonstrating a link between the value premium and risk, the empirical evidence draws inconsistent conclusions on whether distress risk is a systematic risk factor that is priced in the cross section of stock returns. There...
Hard To Time Outperformance
The efficient market hypothesis asserts that financial markets are “informationally efficient”; that is, investors shouldn’t expect to consistently achieve returns in excess of average market returns on a risk-adjusted basis, given the information available at the time the investment is made. However, we know...
Accessing the Profitability Factor
A June 2012 study by Robert Novy-Marx, “The Other Side of Value: The Gross Profitability Premium,” provides investors with new insights into the cross section of stock returns. Among the important findings were: Profitability, as measured by gross profits-to-assets—gross profits...
4 Alternatives to Reverse Mortgages
You may be all too familiar with commercials featuring folksy celebrities explaining how everyone tells him that reverse mortgages sound “too good to be true,” but there isn’t a catch this time. You can have the best of both worlds:...
Investors Should Look Out for Conflicts of Interest
In his new book, “Negotiating Your Investments,” Steven G. Blum discusses some of the traps investors confront when they seek financial advice. This book contains a wealth of helpful information, but I am going to focus on two areas of...
A Tale of Two Investors
This is a tale of two fictional investors, Paul and Mary. They approach investing very differently. I suspect you will be able to identify with one of them, and perhaps learn something from both. Both Paul and Mary are deeply...
The Illogic of Active Trading
Individual investors have been busy the last few months. TD Ameritrade saw a 30 percent jump in daily trading volume compared with the same period last year. Other discount brokers reported a similar increase in daily trading volume. I spoke to TD...
