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Articles of Interest

Monetary Policy & Mutual Fund Flows

  • October 3rd, 2016
  • ETF

The Federal Open Market Committee (FOMC) of the Federal Reserve sets a target for the federal funds rate (FFR) in an effort to influence the money supply, and in turn the broader economy. This, along with more uncommon actions like quantitative easing, is monetary policy. In a world of efficient markets, all known information is… Read More

‘Incredible Shrinking Alpha’ Continues

  • October 3rd, 2016
  • ETF

Even though Wall Street tries to keep alive the debate about the merits of active versus passive investing, a clear trend has emerged over the last several decades in which investors are slowly but steadily abandoning the hope of outperformance that active management offers in favor of the certainty of earning market (not average) returns… Read More

A Persistent Kind Of Momentum

  • October 3rd, 2016
  • ETF

Time-series momentum examines the trend of an asset with respect to its own past performance. This is very different than cross-sectional momentum (often referred to as Carhart momentum), which compares the performance of an asset with respect to the performance of another asset. Ian D’Souza, Voraphat Srichanachaichok, George Jiaguo Wang and Chelsea Yaqiong Yao, who… Read More

Explaining The ‘Disposition Effect’

  • October 3rd, 2016
  • BSP Author

There is a large body of academic evidence demonstrating that individual investors are subject to the “disposition effect.” Those suffering from this phenomenon, which was initially described by Hersh Shefrin and Meir Statman in their 1985 paper, “The Disposition to Sell Winners Too Early and Ride Losers Too Long: Theory and Evidence,” tend to sell… Read More

Trend Following Works Weakest After Crises

  • September 19th, 2016
  • ETF

Time-series momentum examines the trend of an asset with respect to its own past performance. This is different than cross-sectional momentum (often referred to as Carhart momentum), which compares the performance of an asset with respect to the performance of another asset. Research into time-series momentum has found it to be persistent across both time… Read More

Ignore Forecasts—They’re Usually Wrong

  • September 19th, 2016
  • ETF

I have been quite surprised by the number of queries I’ve received recently from advisors and clients regarding the dire economic and market forecasts of Frank Porter Stansberry. So, I thought I would share my response. To begin, here’s the entry for him on Wikipedia: “Frank Porter Stansberry is an American financial publisher and author…. Read More

Explaining The ‘Disposition Effect’

  • September 19th, 2016
  • ETF

There is a large body of academic evidence demonstrating that individual investors are subject to the “disposition effect.” Those suffering from this phenomenon, which was initially described by Hersh Shefrin and Meir Statman in their 1985 paper, “The Disposition to Sell Winners Too Early and Ride Losers Too Long: Theory and Evidence,” tend to sell… Read More

The Irrelevance of Dividends

  • September 12th, 2016
  • BSP Author

Research has established that dividend policy should be irrelevant to stock returns, yet investors have long demonstrated an irrational preference for them. Mutual fund providers are well-aware of this fact. Earlier this week, we reviewed a pair of studies showing that mutual fund managers exploit investors’ well-documented preference for cash dividends to attract assets by artificially “juicing”… Read More

An Interview with Larry Swedroe Ahead of the Evidence-Based Investing Conference

  • September 12th, 2016
  • BSP Author

Larry Swedroe sits down to talk authorship, factor investing, smart beta and how to prevent political views from impacting your investment decisions in an interview with Robin Powell ahead of this year’s new Evidence-Based Investing Conference. Find it on EvidenceInvestor.co.uk By clicking on any of the links above, you acknowledge that they are solely for… Read More

Revised Catastrophe Bonds Worth A Look

  • September 5th, 2016
  • ETF

Insurance-linked securities (ILS) are a relatively recent financial innovation designed to allow risk to transfer from the insurance industry to the financial markets. Pension funds, banks and sovereign wealth funds are the largest holders of ILS, and hedge funds recently have started to specialize in managing ILS portfolios. Catastrophe (cat) bonds make up the largest… Read More

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