Do Upside and Downside Capture Ratios Predict Mutual Fund Performance?
The importance of actively managed mutual funds in the financial sector has led to substantial research focused on their performance. The overwhelming evidence is that it’s very difficult, if not impossible, to identify ahead of time the shrinking percentage of...
Diversification Is Key to Factor Investing
As my co-author, Andrew Berkin, and I explain in our forthcoming book, “Your Complete Guide to Factor-Based Investing,” no matter how strong the evidence regarding the persistence and pervasiveness of an investment factor’s return premium, there’s some chance that the...
The Dangerous Education Gap
A large body of research on the behavior of individual investors has demonstrated that low levels of financial knowledge, in addition to biases in the selection and processing of information, drive suboptimal financial choices. Among the findings from the literature...
You Won’t Get Fooled Again: Understanding the Availability Bias in Investing
You’re no fool. But let’s imagine for a second that a major public figure said something—something false—over and over (and over) again. Regardless of its questionable veracity, is there a chance you’d be more likely to believe the proclamation simply...
Investing in Consumer Loans Comes More Into Focus
Online peer-to-peer (P2P) lending is emerging as a provider of credit to individuals as well as small businesses, with the potential to benefit borrowers (by reducing the high cost of bank credit, credit card debt and payday loans) and lenders...
What a 12-Year-Old Ukulele Player Teaches Us About Authenticity In Our Work
What vocational lessons could we possibly learn from the 12-year-old viral sensation who just won America’s Got Talent? I don’t watch reality television contests, because as a rule, the best participants rarely participate and when they do, they almost never win....
Trend Following Works the Weakest After Financial Crises
Time-series momentum examines the trend of an asset with respect to its own past performance. This is different than cross-sectional momentum (often referred to as Carhart momentum), which compares the performance of an asset with respect to the performance of...
Explaining The ‘Disposition Effect’
There is a large body of academic evidence demonstrating that individual investors are subject to the “disposition effect.” Those suffering from this phenomenon, which was initially described by Hersh Shefrin and Meir Statman in their 1985 paper, “The Disposition to...
The Irrelevance of Dividends
Research has established that dividend policy should be irrelevant to stock returns, yet investors have long demonstrated an irrational preference for them. Mutual fund providers are well-aware of this fact. Earlier this week, we reviewed a pair of studies showing that mutual...
An Interview with Larry Swedroe Ahead of the Evidence-Based Investing Conference
Larry Swedroe sits down to talk authorship, factor investing, smart beta and how to prevent political views from impacting your investment decisions in an interview with Robin Powell ahead of this year’s new Evidence-Based Investing Conference. Find it on EvidenceInvestor.co.uk...
