Learning Center

Anna Cieslak and Pavol Povala—authors of the paper “Expected Returns in Treasury Bonds,” which was published in the September 2015 issue of The Review of Financial Studies—examined the time variation in the risk premium that investors require for holding Treasury bonds. While most of the authors’ analysis relies on data starting in 1971 (when data...

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For many market observers and participants, billionaire Seth Klarman resides in the same “ZIP code” that Warren Buffett once called the home of superstar investors: “Graham and Doddsville.” Klarman is the well-regarded founder and CEO of the Baupost Group, a Boston-based private investment partnership with nearly $30 billion in assets under management. He has also...

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In a series of previous articles on Seth Klarman’s book, “Margin of Safety: Risk-Averse Value Investing Strategies for the Thoughtful Investor,” I showed how his statement that indexing assures mediocre returns was very clearly incorrect. I demonstrated as well that many of his additional contentions about indexing and market efficiency were also false. Today I’ll...

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Professors Eugene Fama and Kenneth French have a new paper, “Incremental Variables and the Investment Opportunity Set,” that provides some important insights for investors considering funds designed to supply exposure to multiple factors, or styles, of investing. In their study, they note: “Much asset pricing research is a search for variables that improve understanding of...

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In a podcast interview posted last week, Tim O’Neill, global co-head of Goldman Sachs’ investment management division, warned investors that if passive investing gets too big, the market won’t work. He then added: “So in terms of the size, a market needs both active and passive investing, because if everybody’s a passive investor, there’s no...

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