Learning Center

What Michael Lewis’s Book Has to Do With Your Money

Date14 Apr 2014

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Do you consider yourself an investor or a trader? The answer matters because there’s a big distinction between the two. It’s also an answer that will help you make sense of the current sideshow entertaining most of Wall Street: Michael Lewis’s latest book, “Flash Boys: A Wall Street Revolt.” Starting on Sunday with an interview on “60...

Evidence Based Investing: The Importance of Education

Date14 Apr 2014

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It is our desire and intent to educate clients about how capital markets work and to provide them with the information necessary for their financial well-being. The advice to follow an evidence-based approach to investing is significantly different from most of the advice heard on Wall Street and in the financial media. It also...

Evidence Based Investing: The Five-Point Plan

Date14 Apr 2014

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Point 1: Markets Are Efficient Public information is of little fundamental value. New information is so quickly incorporated into asset prices that use of this knowledge cannot be expected to consistently yield superior risk-adjusted returns. Point 2: Risk and Expected Reward Are Related Investors who expect or need to achieve higher returns must accept...

When The Very Best Fail, Should You Be Trying?

Date08 Apr 2014

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Recently, I received an email from Russell Investments announcing that they had terminated several money managers and hired new ones. The funds that had changes in management were the Russell Emerging Markets Fund, the Russell International Developed Markets Fund, the Russell Global Infrastructure Fund, and the Russell Tax-Managed Mid- and Small-Cap Fund. Russell is one...

What Happens If The Dollar Loses Its Status As Reserve Currency?

Date08 Apr 2014

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Earlier this month, the People’s Bank of China announced that it would double the allowable trading range for the yuan against the dollar to 2 percent from a midpoint rate it sets every day. This move provides evidence that the government is moving toward a more market-driven economy. I’ve noted that there’s a direct correlation between announcements...

Improving on Fama-French

Date08 Apr 2014

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In 1993, the Fama-French three-factor (beta, size and value) model replaced the single-factor capital asset pricing model (CAPM) and became the standard model in finance, explaining more than 90 percent of the variation of returns of diversified portfolios. While the model was a big improvement over the CAPM, it couldn’t explain some major anomalies. In...

Explaining Momentum Factors

Date08 Apr 2014

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Since the publication of the study “Returns to Buying Winners and Selling Losers: Implications for Stock Market Efficiency” in 1993, the momentum anomaly—buying past winners and selling past losers, generates abnormal returns in the short run—has received a lot of attention. This anomaly presents perhaps the greatest challenge to market efficiency, because it could not be explained by...

The Secret Ingredient to a Happy Retirement: Patience

Date08 Apr 2014

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Many great discoveries come about by accident, like the discovery of the anti-malarial drug quinine, the smallpox vaccination, X-rays and insulin. Here’s a discovery that relates to retirement: the unexpected importance of marshmallows in explaining the difficulty of delaying gratification. A famous Stanford study by Walter Mischel, which took place in the late 60s and...

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