A Look At Record Profit Margins
It’s not as if investors didn’t already have enough to worry about in the uneven aftermath of the financial crisis. Now, money pundits are crowing that record profit margins might soon pose a problem in markets. Some of the worries...
Myths About Momentum: Part II
Today concludes a two-part series on myths about momentum. We’ll pick up right where we left off with the additional myths the paper “Fact, Fiction and Momentum Investing” discusses. Read the rest of the article on Seeking Alpha.
Myths About Momentum: Part I
Today begins a two-part series on momentum and the myths that surround it. Momentum is the phenomenon that explains how securities, which have performed well relative to peers (winners), on average, continue to outperform, and securities, that have performed relatively...
Is Momentum Overgrazed?
My previous post addressed the issue, “Is the stock market overgrazed?” It raised questions about the forward-looking expectations for the beta, size and value premiums that have existed historically. Researcher Claude Erb showed that each of these premiums has been...
What’s the best incentive scheme for fund managers?
Here’s an argument hedge fund marketers make to tout hedge funds’ superiority over mutual funds. They point out that unlike mutual fund managers, who are paid solely based on assets under management, hedge fund managers also receive incentive compensation. The...
Why do investors keep buying actively managed funds?
An overwhelming body of evidence shows that actively managed mutual funds underperform their appropriate risk-adjusted benchmarks. In addition, little to no evidence points to persistence of performance beyond the randomly expected, which means past performance isn’t prologue. That’s the reason...
Can past performance predict future performance?
Most investors are well aware of the SEC’s warning that past performance isn’t an indicator of future performance. That warning often leads to questions like: “If past performance isn’t predictive, why do you believe that the past outperformance of value...
Has The Small-Cap Premium Collapsed?
Today begins a two-part series exploring premiums, starting with the size premium. With the dramatic outperformance of U.S. small-cap stocks over the past several years, we’ve had many stories in the financial media warning investors about their future performance. Since...
Is Cohen & Steers Really The King Of REITS?
Articles such as the recent post on Seeking Alpha that referred to Cohen & Steers as the “King of REITs” stir my interest – though, perhaps, not in a typical way. The article noted that “Cohen & Steers has been around since...
Finer Points Of Momentum Factor
Compared with risk factors in investing—such as the market, value or size—momentum has offered investors the highest Sharpe ratio. However, momentum does have a dark side, as it has had some of the worst crashes. The large gains associated with...
