‘Sure Things’ That Weren’t This Year
At the start of each year, I put together a list of predictions made by gurus (and often repeated by investors, who hear about these forecasts through the financial media). It’s sort of a consensus of things “sure” to happen...
Annuities & Problems Of Longevity
As the director of research for The BAM Alliance, I frequently receive questions related to the advisability of purchasing payout annuities (as opposed to variable annuities, which I generally categorize as products meant to be sold, not bought). Combine the...
‘Smart’ Money Blunts Mispricing
A large body of evidence demonstrates the persistence of numerous anomalies in stock prices, which suggests they can depart from fundamentals for periods of time. The anomalies include: Failure Probability: Stocks with a high probability of failure have lower future...
Spikes Can Explain Returns
Recently there has been a lot of research on the question of whether higher moments of return other than volatility (specifically, the skewness of returns) helps to explain equity returns. (I’ve included a brief definition of skewness and a demonstrative...
Glamour Can Distract Investors
There’s very strong historical evidence to support the existence of a value premium in equity markets. While there’s no dispute over the existence of the value premium (value stocks have provided an annual average return 5% higher than growth stocks...
Value Beats Glamour
Earlier this week, we examined a recent study contributing to the literature that supports a behavioral-based argument for the value premium, in particular that investors persistently overvalue the earnings prospects of growth (“glamour”) stocks. The study—“Glamour, Value and Anchoring on...
Stay Diversified Through Lows
There are several keys to having a successful investment experience. The first is to create a well-thought-out financial plan. This plan should begin with identifying your ability, willingness and need to take risk, as well as what it is you...
Liquidity Key Price Factor
Liquidity—the ability to buy and sell significant quantities of a given asset, quickly, at low cost and without a major price concession—is valuable to investors. Therefore, they demand a premium as compensation for the greater risks and costs of investing...
Active Funds Whiff Again
The year-end 2015 S&P Active Versus Passive (SPIVA) scorecard provides yet another example of why—at least when it comes to the overall results of active management relative to appropriate benchmarks—the past is in fact prologue. Following are some highlights from...
Don’t Bother Timing Premiums
Because of the magnitude, persistence, pervasiveness and robustness of their related premiums, several factors have dominated the academic literature. Among them are market beta, size, value, momentum and profitability. However, despite their persistence, each factor has undergone even fairly long...
