Revised Catastrophe Bonds Worth A Look
Insurance-linked securities (ILS) are a relatively recent financial innovation designed to allow risk to transfer from the insurance industry to the financial markets. Pension funds, banks and sovereign wealth funds are the largest holders of ILS, and hedge funds recently...
Socially Responsible Investing Is A (Minor) Drag
Socially responsible investing, which is designed to address investors’ ethical and financial concerns, has gradually developed to include the consideration of firms’ environmental, social and governance (ESG) performance An interesting question is whether ESG investing has an impact on risk-adjusted...
The Cause Of Myopic Loss Aversion
From 1927 through 2015, there has been a very large difference between the returns to the S&P 500 and the returns to risk-free Treasury bills—about 8.5% on an annual average basis and about 6.7% on an annualized basis. This large...
Mutual Funds Lace Portfolios with Dividend “Juice”
It has long been known that many investors have a preference for cash dividends. From the perspective of classical financial theory, this behavior is an anomaly. The reason is that, in their 1961 paper, “Dividend Policy, Growth, and the Valuation...
Don’t Let Wall Street Fool You Into Taking Too Much Risk
Competition for your dollars creates an inertia that always seems to lead Wall Street down the path of unhelpfully increasing the risk in your portfolio. The recent Wall Street Journal headline, “Bond Funds Turn Up Risk,” illustrates an especially alarming...
Looking At Your Portfolio Hurts Returns
Earlier this week, we examined a pair of studies that sought to explore the relationship between the equity premium puzzle and investor behavior, specifically a behavior known as myopic loss aversion (MLA). MLA describes the tendency of investors who are...
