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Fixed Income’s Low-Risk Anomaly

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Modern financial theory now includes the existence of many anomalies that shouldn’t exist if investors were perfectly rational and markets were perfectly efficient. Perhaps the most important anomaly is the persistent and pervasive momentum premium. Among the others are the low-volatility anomaly (low-volatility stocks have outperformed high-volatility stocks) and the poor performance of extreme small...

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More On Value Premium And Risk

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Today concludes our two-part series on the research aimed to provide explanations for risk. We’ll pick up with more research on the topic. We looked at three different papers in Part I as we sought to assess the value premium through the lens of risk, and today we turn to a fourth paper: The 2005 study “Understanding...

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Why Beating The Market Is An Uphill Skate

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It is absolutely possible to beat the market, just as I’m sure it’s possible that someone could climb Mt. Everest in a pair of roller skates. It is so improbable, however, that it’s rendered a fruitless, if not counterproductive, pursuit. After 16 years in the financial industry and seeing countless great investors eventually humbled by market...

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Don’t Be a Member of the Hedge Fund Club

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2013 was another great year for the global hedge fund industry. Net inflows were almost $64 billion and total assets reaching $2.63 trillion. Unfortunately, investors in hedge funds haven’t fared as well as the purveyors. Thus, we have one of the more puzzling anomalies in finance — the continued growth of an industry that for...

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10 “Sure Things” for 2014: First-Quarter Review

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Now that we’ve got one quarter of 2014 behind us, it’s time to review how some financial pundits’ “sure thing” predictions for this year are turning out. Keep in mind that if they were “sure things,” they should all (or at least most) be coming true. We’ll give a score of +1 for a forecast that’s coming...

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The Impact of High-Frequency Traders

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The recent appearance of Michael Lewis, author of Flash Boys: A Wall Street Revolt, on 60 Minutes, created quite a stir about the impact of high-frequency traders (HFTs), claiming the game was, and has been, rigged, with the victims being all investors. High-frequency trading is a set of computerized trading strategies characterized by extremely short position-holding periods....

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