Passive Investing’s Foundations
Building upon the work of Harry Markowitz, the trio of John Lintner, William Sharpe and Jack Treynor are generally given most of the credit for introducing the first formal asset pricing model, the capital asset pricing model (CAPM). It was...
Questioning Value Of Endowments
Educational institutions hold billions of dollars in endowment funds. As of June 2013, the most recent data available, the five largest educational endowments (Harvard University, Yale University, The University of Texas system, Stanford University and Princeton University) collectively managed nearly...
The Best Inflation Protection
A recent CNBC poll asked, “Which asset are you buying as a hedge against inflation?” The three choices offered were equities, precious metals or alternative assets. My colleague and co-author, Kevin Grogan, found it interesting that the poll provided takers...
Why Alpha’s Getting More Elusive
Baseball’s “modern era” began in 1903. Prior to that time, foul balls that weren’t caught weren’t considered strikes, giving hitters a major advantage. From 1903 through 1941, seven different players achieved a batting average of over .400 a total of...
Book To Market & Size Premium
Since the 1992 publication of “The Cross-Section of Expected Stock Returns” by Eugene Fama and Ken French, the size factor has been among those used in asset pricing models that attempt to explain the differences in returns of diversified portfolios....
Know The Risks, Stick To The Plan
In my 20 years’ experience as a financial advisor, I’ve learned that even if there were such a thing as the “perfect portfolio,” choosing the asset allocation that’s most likely to allow you to adhere to your financial plan is...
The Risks Of Carry Trade
The carry-trade strategy involves borrowing (going short on) a currency with a relatively low interest rate and using the proceeds to purchase (going long on) a currency yielding a higher interest rate, capturing the interest differential. The strategy can be...
Gold Is A Hedge—If You Have Time
Gold has long been used as a store of value, as a unit of exchange and to make jewelry. More recently, due to the popular view that it’s a safe haven in times of economic trouble, gold has come to...
A Close Look At Private Equity
The private equity industry has changed substantially since the “Prudent Man” rule was modified in 1978 to give institutional investors the ability to allocate part of their portfolios to alternative assets. The industry has grown tremendously over the past 30...
Understanding The Value Premium
Historically, value stocks have outperformed growth stocks. The evidence is persistent and pervasive, both around the globe and across asset classes. While there’s no debate about the premium, there are two competing theories to explain its existence. The Classic Theory...
