Cross Trading Boosts Mutual Funds Returns
The vast majority of financial trades take place in open and highly regulated markets. However, asset managers from mutual fund families sometimes offset their trades with affiliated funds in an internal market. Such cross-trading can allow fund families to shift...
Beware Of The Low Price Illusion
The absolute level of a firm’s stock price is arbitrary, as it can be easily manipulated by altering the number of shares outstanding (for example, by splitting the stock). Despite this obvious fact, research into investor behavior has found a...
Japan’s Pension Fund Trips On Active Mgmt
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...
Published Results Impact Future Results
Financial research has uncovered many relationships between investment factors and stock returns. For investors, an important question is whether the publication of this research can impact the future size of factor premiums. Asking this question is crucial on two fronts....
Trend-Following Strategies Work
As an investment style, trend-following, also referred to as time-series momentum, has existed for quite some time. Time-series momentum examines the trend of an asset with respect to its own past performance. This is different from cross-sectional momentum, which compares...
Checking In With The ‘Gurudex’
One of my favorite sayings about the market forecasts of so-called experts is from Jason Zweig, financial columnist for The Wall Street Journal: “Whenever some analyst seems to know what he’s talking about, remember that pigs will fly before he’ll...
‘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...
Hedge Funds Fail Across Asset Classes
Hedge funds began this year coming off their seventh-straight year of trailing U.S. stocks (as measured by the S&P 500 Index) by significant margins. What’s more, for the 10-year period ending 2015 (one that included the worst bear market in...
Is Momentum Really Dead?
Earlier this week, we examined a study that sought to determine whether the publication of academics’ findings on the momentum factor have led to a disappearing premium. To review, Steven Dolvin and Bryan Foltice, authors of the 2016 study “Where...
The Dangerous Educational 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...