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Low Priced Stocks No Bargain

  • November 14th, 2016
  • ETF

As I wrote about last week, the absolute level of a firm’s stock price is arbitrary, as it can be easily manipulated by the firm through altering the number of shares outstanding (for example, by splitting the stock). Despite this obvious fact, the research into investor behavior has found a strong preference among individuals for… Read More

Bottom-Up Works Best With Multiple Factors

  • November 14th, 2016
  • ETF

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

How Risk & Uncertainty Affect Returns

  • November 14th, 2016
  • ETF

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… Read More

What you can—and can’t—learn from a tax return

  • November 7th, 2016
  • CNBC

Donald Trump said in the first presidential debate that not much could be learned from his tax returns. Financial advisor Tim Maurer sets the story straight, explaining exactly what… Read the rest of the article on CNBC.

Cross Trading Boosts Mutual Funds Returns

  • November 7th, 2016
  • ETF

The vast majority of financial trades take place in open and highly regulated markets. However, asset managers from mutual fund families sometimes offset their trades with affiliated funds in an internal market. Such cross-trading can allow fund families to shift performance from poorly performing funds to better performing funds, artificially inflating their returns. Research shows… Read More

Beware Of The Low Price Illusion

  • November 7th, 2016
  • ETF

The absolute level of a firm’s stock price is arbitrary, as it can be easily manipulated by altering the number of shares outstanding (for example, by splitting the stock). Despite this obvious fact, research into investor behavior has found a strong preference for low-priced stocks on the part of individual investors. For instance, research has… Read More

Japan’s Pension Fund Trips On Active Mgmt

  • November 7th, 2016
  • ETF

Japan’s Government Pension Investment Fund (GPIF) is the world’s biggest state investor, trumping all other managed government retirement and sovereign wealth funds. Prime Minister Shinzo Abe’s drive to spur the Japanese economy out of its two-decade-and-growing economic slump, known as Abenomics, has pushed the GPIF to plow more money into risky investments, aiming both to… Read More

Published Results Impact Future Results

  • November 7th, 2016
  • ETF

Financial research has uncovered many relationships between investment factors and stock returns. For investors, an important question is whether the publication of this research can impact the future size of factor premiums. Asking this question is crucial on two fronts. First, if anomalies are the result of behavioral errors, or even investor preferences, and the… Read More

Trend-Following Strategies Work

  • November 7th, 2016
  • ETF

As an investment style, trend-following, also referred to as time-series momentum, has existed for quite some time. Time-series momentum examines the trend of an asset with respect to its own past performance. This is different from cross-sectional momentum, which compares the performance of an asset with respect to the performance of another asset. Academic research… Read More

Some Alternatives to Big Banks and Their Record-High Fees

  • October 31st, 2016
  • BSP Author

Fees are at an all-time high at the nation’s big banks, while the interest they pay is at an all-time low. Worse yet, evidence recently has come to light of the criminal abuse of a practice common among large banks since the fall of Glass-Steagall: cross-selling. Cross-selling is rooted in consumer research that large financial institutions tend… Read More

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