Do Rising Rates Spell Doom For REITs?
As we have discussed many times, much of the conventional wisdom on investing is simply wrong. For our purposes, we can define conventional wisdom as those ideas that are so commonly accepted that they go unquestioned. Today, we’ll look at...
The Long And Short Of The Low-Volatility Anomaly
As far back as the early 1970s, research has shown that the lowest volatility stocks have provided better returns than the highest volatility stocks. These findings run counter to economic theory, resulting in the low-volatility anomaly. The academic research, combined...
Does Taking Corporate Credit Risk Add Value?
Earlier this week, we looked at whether adding credit risk in the form of lower investment-grade municipal bonds was an efficient approach to improving returns. The evidence is clear that this isn’t the case. In fact, taking more credit risk...
Do Lower Investment-Grade Municipal Bonds Add Value?
The Federal Reserve’s zero-interest rate policy is now well into its fifth year, probably far longer than most – if not all – investors were expecting. This persistence of low interest rates has pushed many investors to stretch for greater...
The Role Of Credit Risk In Exchange-Traded Notes
The financial crisis of 2008 underscored the role that credit risk plays in many investments. And while counterparty risk has been in the spotlight with such derivatives as credit default swaps, comparatively little attention is paid to its impact on...
Why We Love Premium Bonds And You Should Too
A common error made by many bond investors is to avoid purchasing premium bonds – bonds that trade above their face value (or par, typically 100). A bond will trade at a premium when the coupon (stated) yield is above...
The Hurdles Are Getting Higher For Active Management
The goal of actively managed funds is to generate alpha – returns above the appropriate risk-adjusted benchmark. We might add here that the alpha should also be sufficient to compensate for the increased idiosyncratic risks active managers take by failing...
Do Day Traders Evidence Skill?
Professors of finance Brad Barber and Terrance Odean have done extensive research on the performance and habits of individual investors. Among their findings is that, on average, individual investors lose money from trading – and not all of the losses...
Does Private Equity Deliver Alpha
The term private equity – PE – is used to describe various types of privately placed (non-publicly traded) investments. It has grown tremendously over the past 30 years – thanks largely to America’s pension funds as they search for alternatives...
Has The Realized Equity Premium Been Shrinking?
Tying up our two-part series on premiums, today we’ll explore the equity premium. Claude Erb has done a series of papers in which he examines the various premiums – size, value, momentum, and beta – and found that there’s a demonstrable...
