Index Funds Win Across Borders
Thanks to Standard and Poor’s Indices Versus Active (SPIVA) scorecard, investors are becoming ever-more aware both of the persistent underperformance of the vast majority of actively managed funds as well the lack of evidence showing any persistence among the minority...
For True Freedom, Learn to Deal With Uncertainty
Almost 10 years ago, I knew a guy on a financial rocket ship. He had a great house, a successful business and a solid income. But then things changed. With the benefit of hindsight, it was clear he bought a...
Keep Skewness In Perspective
Diego Amaya, Peter Christoffersen, Kris Jacobs and Aurelio Vasquez, authors of the new paper, “Does Realized Skewness Predict the Cross-Section of Equity Returns?”, examined higher moments of volatility, skewness and kurtosis to determine if they have provided incremental explanatory power...
Collapsing Arguments for Conflicted Advice
I had an interesting experience recently. I gave a talk to a group of investors. In the audience were a few brokers. My presentation consisted of two basic points: 1. Send an email to your broker or financial advisor and...
Hedge Funds Dropping Like Flies
Fortress Investment Group is closing its flagship hedge fund following heavy losses and investor withdrawals. The fund, which had managed more than $8 billion in 2007, saw its assets fall to $3.2 billion at the start of 2015 and then...
What Your Financial Adviser Needs to Know About Your Brain
Behavioral economist Richard Thaler explains why financial professionals need to be familiar with psychology. Daniel Kahneman and Amos Tversky legitimized behavioral economics—the study of how people really behave around money, as opposed to how economists say a rational person ought...
Hedge Funds Win With A Draw
The third quarter of 2015 brought hedge funds a very small amount of relief from their historically poor performance. Keep in mind, however, that hedge funds entered January coming off their sixth-straight year of trailing U.S. stocks by significant margins....
Stock Volatility Moves Treasurys
Understanding the volatility of Treasury bond returns, as well as the volatility of both the level and slope of the Treasury term-structure, are fundamental issues in finance. What’s more, they have important implications for investors and portfolio design. Researchers have...
Correlations Can Be Predictive
Academic researchers have presented theory, as well as empirical evidence, suggesting certain linkages between equity risk and the Treasury bond market, a relationship that clearly has important implications for investors’ understanding of markets and portfolio design. Studies, for example, have...
Behavioral Funds Disappoint
Behavioral finance combines the study of human behavior and cognitive psychology with traditional economic and financial theory to explain why people make irrational decisions that can lead to investment mistakes, including the mispricing of assets (which are called anomalies). The...
