Fiduciary Duty Defeats ‘Phishing’
Classical economic theory suggests that free markets, in which individuals each act according to their self-interest, yield the best of all possible worlds. All one has to do is look around at places like Cuba and North Korea to see...
Equity Offerings & Tail Risk
It’s logical to believe that corporate managers have a preference for issuing equity at times they perceive their firm’s stock price is overvalued or high relative to some benchmark (such as price-to-earnings ratio or book-to-market ratio). The academic research on...
More On The Bad News Delay
Earlier this week, we discussed a March 2016 study by Rodney Boehme, Veljko Fotak and Anthony May, “Crash Risk and Seasoned Equity Offerings,” which provided evidence that companies will tend to withhold (and accumulate) bad news for an extended period...
Why Alt Funds Underperform
The financial crisis of 2008, when all risky asset classes suffered dramatic losses, led many investors to seek out “alternative” investments that claimed to provide downside protection, or positive returns independent of the market environment. This resulted in the introduction...
CAPE 10 Ratio In Need Of Context
The Shiller cyclically adjusted (for inflation) price-to-earnings ratio—referred to as the CAPE 10 because it averages the last 10 years’ earnings and adjusts them for inflation—is a metric used by many to determine whether the market is undervalued, fairly valued...
No Big Edge For More-Active Funds
The prevailing wisdom is that the market for equities in emerging markets is less efficient than in developed markets. Unfortunately, the evidence doesn’t support this hypothesis. For instance, the S&P Indices Versus Active (SPIVA) scorecard showed that over the 10-year...
A Private-Equity Puzzle
Capital committed to private equity (PE) funds worldwide has risen substantially in the last two decades, thanks largely to U.S. pension funds searching for alternatives to public equity markets that might help them meet their return objectives. Endowments seeking to...
Passive Investing Without Indexes
Most investors believe all passively managed funds within the same asset class should have the same, or at least very similar, returns. However, while all index funds and passive structured asset class funds are similar in the way that rectangles...
Hedge Funds Fail To Impress In Q1
Hedge funds entered 2016 coming off their seventh-straight year of trailing U.S. stocks (as measured by the S&P 500 Index) by significant margins. And for the 10-year period ending 2015—one that included the worst bear market in the post-Depression era—the...
Taxes Can Be A Real Drag
As the annual S&P Active Versus Passive (SPIVA) scorecard demonstrated, 2015 was another painful year for U.S. actively managed funds. It found that 66.1% of large-cap managers, 56.8% of midcap managers, 72.2% of small-cap managers and 61.9% of real estate...
