An Interesting Test of Market Efficiency
Japan’s Government Pension Investment Fund (GPIF) is the world’s biggest state investor, trumping all other managed government retirement and sovereign wealth funds. Prime Minister Shinzo Abe’s drive to spur the Japanese economy out of its two-decade-and-growing economic slump, known as...
“Free Lunch” Investing Takes Time to Cook
As the director of research for The BAM Alliance, I’ve been getting lots of calls recently from investors questioning their international equity investments. This hasn’t been a surprise, as any time an asset class does poorly, a significant number of...
The Truth About Stock Prices
In the last few weeks, I’ve unpacked studies addressing both the nominal price illusion and the nominal price premium. So today I’ll answer a related question: Do nominal stock prices really matter? Because the level of a company’s stock price...
What The Stock Market Wants This Election, And What You Should Do In Your Portfolio
We’ll know soon enough who America chooses as its next president, but the market has already voted. Who does the stock market “want” to win? Hillary Clinton. This isn’t a partisan statement, but simply a statement of fact. There may...
Low Priced Stocks No Bargain
As I wrote about last week, the absolute level of a firm’s stock price is arbitrary, as it can be easily manipulated by the firm through altering the number of shares outstanding (for example, by splitting the stock). Despite this...
Bottom-Up Works Best With Multiple Factors
CAPM was the first formal asset pricing model. Market beta was its sole factor. With the 1992 publication of their paper, “The Cross-Section of Expected Stock Returns,” Eugene Fama and Kenneth French introduced a new-and-improved three-factor model, adding size and...
How Risk & Uncertainty Affect Returns
Asset pricing models imply that equity portfolios’ time-varying exposure to the market risk and uncertainty factors carries with it positive risk premiums. Turan Bali and Hao Zhou contribute to the body of literature on this topic through the study “Risk,...
