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As we have discussed many times, the evidence demonstrates that hedge funds have consistently failed to deliver on their promise of alpha. There is an overwhelming body of research indicating that hedge funds must be ego-driven investments, because there can be no other explanation for why investors continue to pour money down the proverbial drain....

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I was asked recently about a situation in which an investor had to sell stocks from his taxable account in order to meet a cash flow need; in this case, a down payment on a home. He pointed out the “good news” half of his situation. Because the present value of the equities was well...

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The existence of a value premium—the difference in returns between high book-to-market stocks and low book-to-market stocks—has been well-documented. However, there’s a major controversy as to its source. Some believe it can be explained by risk—that value stocks are the stocks of riskier companies. On the other hand, behavioralists believe the premium results from pricing...

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The historical evidence shows us that, in the long run, a thoughtfully designed, diversified portfolio of passively managed funds typically beats the performance of all but a few active managers. And while it’s simple to structure such a portfolio, it’s not easy to maintain. All too often, emotions—such as greed or envy in bull markets,...

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