Remember The Nonfinancial Assets
One of the more common investment mistakes that individual investors—and sometimes even professional advisors—make when they’re developing a comprehensive financial plan is failing to account for important nonfinancial assets. Financial assets are easily observable and typically liquid. Thus, they’re often...
High Frequency Trading & Price Efficiency
The effect of high-frequency trading on market quality has generated strong interest among academics, investors and regulators alike. To further explore the impact high-frequency trading can have on the markets, Jennifer Conrad, Sunil Wahal and Jin Xiang—authors of the study...
Deconstructing Invesco’s Performance
The February 9 edition of Barron’s contained its annual listing of “best fund families” for the past one, five and 10 calendar years. Of all the fund families on the list, Invesco was the only one that managed to make...
Investors Pay Premiums For Bad Bets
The first formal asset pricing model—the capital asset pricing model—was built on certain assumptions, including that investors are risk-averse; will maximize the expected utility of absolute wealth; and care only about the mean and variance of return. However, academic research...
A Must-Read For Serious Investors
As the director of research for The BAM Alliance, and the author and co-author of 15 investment books, I’m often asked about other books I would recommend. For serious investors who want to gain a deeper understanding of how markets...
Active Inefficiency Excuse Hollow
Even many advocates of active management will concede that the efficiency of the market for U.S. large-cap stocks is so great that attempts to add value (generate alpha) through individual stock selection and/or market timing are unlikely to produce positive...
Momentum Across Time & Asset Classes
The academic study of price momentum has intensified considerably since 1993, the year Narasimhan Jegadeesh and Sheridan Titman’s paper, “Returns to Buying Winners and Selling Losers: Implications for Stock Market Efficiency,” appeared in The Journal of Finance. The authors found...
Costs Undermine Active Investment
Unit investment trusts (UITs) are SEC-regulated investment vehicles in which a portfolio of securities is selected by a sponsor and then deposited into a trust. Assets held in UITs have grown steadily since the financial crisis, increasing from about $20...
Exploring The Profitability Factor
A June 2012 study authored by University of Rochester professor Robert Novy-Marx, “The Other Side of Value: The Gross Profitability Premium,” not only provided investors with new insights into the cross section of stocks returns, but also led to the...
Risk-Managed Momentum Outperforms
Momentum has been found to be a persistent and pervasive factor in the returns not only of stocks, but of other asset classes (including bonds, commodities and currencies). Compared with the market, value and size risk factors, momentum in equities...
