Warren Buffett has advised investors to be fearful when others are greedy and greedy only when others are fearful. New research confirms Buffett’s admonition.
New research shows that stocks have historically been a poor hedge against inflation over anything but very long horizons.
Investors seeking higher yields and relatively low risk, and are willing to sacrifice liquidity, will find attractive opportunities in interval funds that invest in senior-secured, sponsored middle-market loans.
Like Samuel Beckett’s titular character Godot, we are still waiting the all-but-certain U.S. recession. It may yet happen, but it’s wise to understand why forecasters were so grossly incorrect.
The performance of PE funds has been disappointing. New research explains why this happened: Instead of driving operational efficiencies (as PE investors typically claim they do), those funds relied heavily on increasing the debt burden for the companies they bought.
I’ve written previously about how positive (“green”) ESG metrics have increased the prices of stocks, reducing their expected returns. New research examines a similar effect in bonds, where a “greenium” (lower yield on green bonds versus non-green equivalents) reduces returns for investors.
Investors planning for retirement are facing seven significant challenges.
Starting valuations are the most reliable predictor of equity returns. But they are far from reliable, and investors must use those forecasts cautiously.
As we enter the hurricane season, there are signs of three financial calamities merging to form the perfect storm. The nexus is in commercial real estate, but it extends to banking and the broader economy.
Investors willing and able to accept the illiquidity risk of CLOs should consider them as alternatives with attractive risk/reward characteristics.
New research has documented the persistent failure of investing based on artificial intelligence (AI). This is unsurprising, given the challenges of active management and the widespread inadequacy of humans to outperform an index fund.
New research shows that those who invest in stocks with positive environmental, social and governance (ESG) scores have improved the behavior of those companies.
Many economists have been forecasting a recession for 2023 due to tightening monetary policy. But that recession has not arrived yet.
Ignore the “noise” of the market and adhere to your well-thought-out asset-allocation strategy that acknowledges both the virtual certainty of recessions and bear markets while also recognizing that trying to time the market based on economic forecasts is likely to prove counterproductive.
Short sellers are informed investors who play a valuable role in keeping market prices efficient – short selling leads to faster price discovery. Fund families that invest systematically have found ways to incorporate the research findings to improve returns.
I will analyze the pros and cons of three funds to access the reinsurance market.
Investors should rely on the wisdom of crowds as expressed through bond yields, not credit rating agencies, to judge fixed-income credit risk.
Risk-averse investors seeking defensive systematic strategies to reduce left-tail risk should broaden their search beyond low volatility/low beta.
New research shows that investors can profit by exploiting “momentum” – the notion that stocks or factors that experienced good performance will continue to do so, and vice versa.
Research has shown that investing in IPOs has been a bad deal – you lose money compared to a comparable index fund. But a new paper shows that certain VC-backed IPOs deliver alpha for investors.
Do broker dealers put customer interests first? Don’t count on it if you are buying or selling municipal bonds.
Despite the overwhelming academic evidence demonstrating the superior, long-term performance of index funds, investors may want to invest in actively managed products. New research shows the importance of choosing low-cost funds.
Resisting recency bias is the key to earning the premiums available from all risky assets, as this example illustrates.
Special purpose acquisition companies (SPACs) impose costs that are subtle, opaque and poorly understood. New research shows just how much SPAC investors stand to lose.
Sustainable investing continues to gain in popularity, with investors worldwide frequently attracted not only by ethical concerns but also by the lure of superior returns. Unfortunately, new research focused on global stocks showed that they did not get what they were sold.
The failure of SVB led to a broader concern over the stability of the financial sector. That has led to fears about client assets held at Charles Schwab, But those concerns are overblown.
The economic signals and a host of geopolitical risks confronting investors suggest that 2023 could be as challenging as 20022 for both stocks and bonds.
New research confirms the valuable role that short sellers play in correcting the valuations of overpriced stocks.
My research confirms what academic theory predicts: There has been no historical alpha among dividend-paying stocks, including those with a history of increasing dividends. Investors are better served by “tilting” allocations to factors that have historically outperformed (e.g., value).
Machine learning shows great promise for empirical asset pricing and has the potential to improve our understanding of expected asset returns.
Low-volatility strategies are often cited as an anomaly offering higher returns without a corresponding increase in risk. But the so-called low-volatility factor is well explained by other factors, and new research shows it does not reduce exposure to “systemic,” broad-economic risks.
If your clients are seduced by television advertisements offering untold wealth accumulation through options trading, new research shows just how destructive that type of speculation has been.
It’s common for a mutual fund to outperform its benchmark over a short time horizon – a few years – as happened with Cathie Wood’s ARKK. But new research shows that mutual funds fail dismally when performance is measured over the long horizons that retirement-focused investors face.
The greatest anomaly is that despite decades of poor performance and the failure to effectively hedge exposure to conventional security classes, assets under management among hedge funds have grown from about $300 billion 25 years ago to about $5 trillion today.
Equal-weighted portfolios have long outperformed cap-weighted funds. Conventional wisdom is that was because of the small-cap factor, but new research shows more is at play.
Advisors can illustrate the risks in single-stock positions by educating their clients on the historical evidence that demonstrates diversification is the prudent strategy.
Markets provided investors with a dozen lessons in 2022 (and a bonus one in the postscript).
Countless investment practitioners and academics have unsuccessfully searched for the metric that can successfully identify future mutual fund outperformers. What follows is the saga of the latest failed attempt.
Contrary to what financial theory predicts, new research from Europe shows that the elderly accumulate assets later in life than expected, likely because they want to leave bequests, are receiving pensions, or are reluctant to part with assets such as their homes.
Great articles don’t always get the readership they deserve. We’ve posted the 10 most-widely read investment, planning and practice management articles over the last two days. Below are another 10 that you might have missed, but I believe merit reading.
Private credit can be an attractive asset that has provided high yield and protection against the risks of rising inflation. In addition, the asset class has a strong credit history – specifically senior, secured, sponsored debt.
The economic tea leaves suggest that 2023 could be another challenging year for both stocks and bonds. However, the outlook is more balanced given that equity valuations are much lower and bond yields much higher.
It has been my tradition to informally rate the investment-related books I read in the past year.
New research reveals that stock prices revert to a predictable P/E multiple, which is a function of growth and profitability. It also shows why growth stocks, while more profitable than value stocks, earn lower returns.
Don’t trust analysis from managers that shows they have outperformed an appropriately selected, passive benchmark. That is true for mutual funds, and new research shows it is equally accurate when it comes to endowments and pension funds.
Socially responsible firms pay more for the external audits of their financial statements, thereby lowering risks to investors. But those lower risks also mean lower returns for investors.
While many investors think that IPOs are exciting, they are risky investments. Academic research shows overwhelmingly that the returns to investors are not commensurate with the risk.
For traditional fixed-income investors seeking higher yield and/or inflation protection, private, senior secured, sponsored debt provides an attractive alternative.
So-called low-volatility portfolios are an apparent anomaly – they appear to offer higher returns with less risk (volatility). New research shows that they are indeed uncorrelated to sources of macroeconomic risk. But their popularity has driven up valuations, dampening the prospects for future returns.
