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What Your Financial Adviser Needs to Know About Your Brain

Date02 Nov 2015

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Behavioral economist Richard Thaler explains why financial professionals need to be familiar with psychology. Daniel Kahneman and Amos Tversky legitimized behavioral economics—the study of how people really behave around money, as opposed to how economists say a rational person ought to behave. Read the rest of the article on Time.

Hedge Funds Win With A Draw

Date02 Nov 2015

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The third quarter of 2015 brought hedge funds a very small amount of relief from their historically poor performance. Keep in mind, however, that hedge funds entered January coming off their sixth-straight year of trailing U.S. stocks by significant margins. And for the 10-year period from 2005 through 2014, which includes the worst bear market...

Stock Volatility Moves Treasurys

Date02 Nov 2015

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Understanding the volatility of Treasury bond returns, as well as the volatility of both the level and slope of the Treasury term-structure, are fundamental issues in finance. What’s more, they have important implications for investors and portfolio design. Researchers have offered both theory and empirical evidence that suggest important linkages between equity risk and the...

Correlations Can Be Predictive

Date02 Nov 2015

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Academic researchers have presented theory, as well as empirical evidence, suggesting certain linkages between equity risk and the Treasury bond market, a relationship that clearly has important implications for investors’ understanding of markets and portfolio design. Studies, for example, have found that greater economic uncertainty leads both to higher equity volatility and increased motives for...

Behavioral Funds Disappoint

Date02 Nov 2015

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Behavioral finance combines the study of human behavior and cognitive psychology with traditional economic and financial theory to explain why people make irrational decisions that can lead to investment mistakes, including the mispricing of assets (which are called anomalies). The field has gained an increasing amount of attention in academia over the past 15 years...

A Hidden Risk You Never Saw Coming

Date02 Nov 2015

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Ken Griffin is a hedge fund manager with an enviable net worth of $7 billion. According to published reports, he recently settled a contentious divorce dispute with his wife, Anne Dias Griffin, shortly before it was scheduled to go to trial. There was a lot at stake. His wife claimed Griffin earned an unbelievable $100...

Your ‘Wealth Advisor’ Probably Isn’t One

Date02 Nov 2015

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Last week, I wrote about an experience I had with a broker who took offense at the use of the term “broker” in a talk I gave to a group of investors. I found that odd because he is employed by a large brokerage firm. So I asked what he wanted to be called, and...

A Simple Tool for Getting Better Financial Advice

Date02 Nov 2015

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If a financial adviser doesn’t know what’s going on in a client’s life, the advice will suffer. Here’s one easy way to fix that. True story: Many years ago, I was meeting with a married couple for an initial data-gathering session. Halfway through the three-hour meeting — the first stage in developing a comprehensive financial...

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