Debunking Private Equity’s Myth
As we have discussed, the investment success of the Yale Endowment led many endowments, foundations and even high-net-worth individuals to consider adopting the strategies utilized in the so-called “Yale Model.” This included a focus on alternative investments and attempts to...
The Effects Of Market Uncertainty
In doing some related research, I came across a Federal Reserve Bank of Atlanta research paper that I thought was worth sharing, especially in light of the tendency in recent years for many investors to stretch for yield. Over the...
Why Do Pensions Ignore Evidence?
There are many well-known anomalies in finance. The most notable of these anomalies include the momentum effect, the low-volatility effect (in which high-volatility stocks produce lower returns on average than low-volatility stocks) and the poor performance of IPOs, penny stocks,...
Deeper Truths About VC Promises
Behavioral finance is a fascinating field that combines psychology with investing. And one of the insights provided from the research is that some individuals want more from their investments than just returns. Some people make investments for the same reason...
Hedge Funds Are Status Symbols
What was the biggest surprise to hit the markets in 2014? I think most investors would tell you it was either that interest rates fell or that the price of a barrel of oil fell by half. My own view...
Inside The ‘Smart Beta’ Hype
While Wall Street investment firms have done a very poor job of delivering good risk-adjusted returns to investors, their well-tuned marketing machines have done a great job creating demand for products where none should really exist. Their latest creation is...
Be Wary Of The Low Vol Factor
The superior performance of low-volatility stocks—the low-volatility anomaly—has been documented to exist in equity markets around the globe. And since its discovery, a good amount of academic research has attempted to determine both its origins and whether or not it...
A Closer Look At Evaluating Risk
Nils Friewald, Christian Wagner and Josef Zechner—authors of the study “The Cross-Section of Credit Risk Premia and Equity Returns,” which appears in the December 2014 edition of the Journal of Finance—studied the relationship between a firm’s default risk and that...
Explaining The Low Vol Anomaly
One of the biggest problems facing the first formal asset pricing model developed by financial economists, the capital asset pricing model (CAPM), was that it predicts a positive relationship between risk and return. Empirical studies have found that the actual...
Heed Buffett & Ignore Forecasts
Earlier this week, we discussed the first six of a total 12 lessons that the markets taught us in 2014 about prudent investment strategies. To recap: Lesson 1: Active management is a loser’s game Lesson 2: The economy and the...
