Advisors to President-elect Donald Trump have been vocal about rescinding the Department of Labor’s new fiduciary rule, introduced earlier this year to protect retirement savers from advice that isn’t fully in their best interests. The rule has already been under fire from the securities industry, and lack of presidential support could spell its ultimate demise. …Read More.
As a general rule of thumb, the more complexity that exists in a Wall Street creation, the faster and farther investors should run. – David Swensen, “Unconventional Success” Earlier this week, I unpacked a recent study from the U.K. that concluded investors’ behavioral biases, combined with features of structured products that can exploit these biases, …Read More.
Eugene Fama and Kenneth French’s seminal 1992 paper, “The Cross-Section of Expected Stock Returns,” resulted in the development of the Fama-French three-factor model. This model added the size and value factors to the market beta factor. One of the benefits of adding the value factor (the tendency for relatively cheap assets to outperform relatively expensive …Read More.
You’re no fool. But let’s imagine for a second that a major public figure said something—something false—over and over (and over) again. Regardless of its questionable veracity, is there a chance you’d be more likely to believe the proclamation simply because you’ve heard it often and recently? Like it or not, the answer is an …Read More.
Last week, we examined the data (from my new book, “Your Complete Guide to Factor-Based Investing,” which I co-authored with Andrew Berkin) on the odds that the premiums associated with some common investment factors would produce a negative return over various horizons. We then examined how constructing a diversified factor portfolio might impact those odds …Read More.
The results of the U.S. presidential election not only surprised almost all the gurus who were saying that a Hillary Clinton victory was a sure thing, but also those forecasting that, if by some miracle Donald Trump won, a stock market crash was bound to occur. Prior to the election, I had received many inquiries …Read More.
As I have been discussing in a series of articles (which you can find here, here and here), we now have a substantial body of evidence demonstrating that individual investors possess a preference for low-priced equities. This is anomalous behavior, because the level of a company’s stock price is arbitrary—firms can manipulate it by adjusting …Read More.
Asset pricing models imply that equity portfolios’ time-varying exposure to the market risk and uncertainty factors carries with it positive risk premiums. Turan Bali and Hao Zhou contribute to the body of literature on this topic through the study “Risk, Uncertainty, and Expected Returns,” which appeared in the June 2016 issue of the Journal of Financial and …Read More.
Eugene Fama and Kenneth French’s seminal 1992 paper, “The Cross-Section of Expected Stock Returns,” resulted in the development of the Fama-French three-factor model. This model added the size and value factors to the market beta factor. One of the benefits of adding the value factor (the tendency for relatively cheap assets to outperform relatively expensive …Read More.
Larry Swedroe discusses his new book, “Your Complete Guide To Factor-Based Investing,” while taking on smart beta, the investment factor “zoo” and how to think differently about diversification in a recent interview with ETF.com’s Drew Voros. Find it on ETF.com By clicking on any of the links above, you acknowledge that they are solely for …Read More.
S&P Dow Jones Indices has long provided a great service to investors with its semi-annual S&P Indices Versus Active (SPIVA) scorecards. The evidence offered in these reports has shown time and again that, regardless of the asset class, the vast majority of active managers persistently fail to outperform their benchmarks, and that there is little to …Read More.
The table below, taken from the newly released book I co-authored with Andrew Berkin, “Your Complete Guide to Factor-Based Investing,” shows the annual premium and Sharpe ratio for the equity factors of market beta, size, value, momentum, profitability and quality. It also shows the odds that each premium will produce a negative return over various …Read More.
Momentum is the tendency for assets that have performed well (poorly) in the recent past to continue to perform well (poorly) in the future, at least for a short period of time. This is a big problem for the efficient markets hypothesis, as there’s no coherent risk-based explanation for momentum’s performance. Not only has there …Read More.
CAPM was the first formal asset pricing model. Market beta was its sole factor. With the 1992 publication of their paper, “The Cross-Section of Expected Stock Returns,” Eugene Fama and Kenneth French introduced a new-and-improved three-factor model, adding size and value to market beta as factors that not only provided premiums, but helped further explain …Read More.
Larry Swedroe discusses his new book, “Your Complete Guide To Factor-Based Investing,” as well as the theory behind factor strategies and how investors can achieve their risk and return objectives through them, in a recent Q&A. Find it on MutualFunds.com By clicking on any of the links above, you acknowledge that they are solely for …Read More.
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