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Rethinking Money, Not as Good or Bad but as a Tool

Almost everything we’re taught about money is focused on spending it and saving it. Parents, teachers and even personal finance books discuss saving money as keeping it, increasing it and controlling it. Saving money involves figuring out ways to get more of it, to build a bigger cushion. We’re taught that’s the ultimate goal. In…

The Effects Of Market Uncertainty

ETF

In doing some related research, I came across a Federal Reserve Bank of Atlanta research paper that I thought was worth sharing, especially in light of the tendency in recent years for many investors to stretch for yield. Over the long term, the correlation of Treasury bonds (whether they are short-, intermediate- or long-term) to…

Deflation and Stock and Bond Returns

Multifactor World

Overview: With expected inflation rates very low, there will be significant attention on the possibility of deflation causing the stock market to fall. This blog examines the relationship between the rate of inflation and stock and bond returns. Generally, the research shows that stock returns are no lower in deflationary environments than in normal inflationary…

Why Do Pensions Ignore Evidence?

ETF

There are many well-known anomalies in finance. The most notable of these anomalies include the momentum effect, the low-volatility effect (in which high-volatility stocks produce lower returns on average than low-volatility stocks) and the poor performance of IPOs, penny stocks, stocks in bankruptcy and small growth stocks with low profits. But perhaps the biggest anomaly…

Deeper Truths About VC Promises

ETF

Behavioral finance is a fascinating field that combines psychology with investing. And one of the insights provided from the research is that some individuals want more from their investments than just returns. Some people make investments for the same reason they buy Rolex watches and oversized Gucci bags, labels proudly displayed. Just like with their…

How Adam Smith Can Change Your Life

Author Russ Roberts takes an interesting tack in his new book, “How Adam Smith Can Change Your Life.” While Smith’s most famous tome, “The Wealth of Nations,” has been most popular in economic and investor circles, his other volume, “The Theory of Moral Sentiments,” contains some of the venerable writer’s most valuable insights. One of…

Hedge Funds Are Status Symbols

ETF

What was the biggest surprise to hit the markets in 2014? I think most investors would tell you it was either that interest rates fell or that the price of a barrel of oil fell by half. My own view is that there was a far bigger one. For the 12 months ended August 2014,…

Inside The ‘Smart Beta’ Hype

ETF

While Wall Street investment firms have done a very poor job of delivering good risk-adjusted returns to investors, their well-tuned marketing machines have done a great job creating demand for products where none should really exist. Their latest creation is a type of investment offering referred to as “smart beta.” To ensure you understand why…

Your Genes Impact Your Investment Decisions

Huffington Post

The sharp market decline in January has raised the anxiety level of investors everywhere and brought out the worst in the financial media. Many investors are asking the wrong questions, like these: 1. Is this the beginning of a market correction? 2. Should I sell my stocks and just “sit on the sidelines”? 3. Is…

Be Wary Of The Low Vol Factor

ETF

The superior performance of low-volatility stocks—the low-volatility anomaly—has been documented to exist in equity markets around the globe. And since its discovery, a good amount of academic research has attempted to determine both its origins and whether or not it will continue to persist. Among that research is a December 2013 paper, “A Study of…

Good Looks, Bad Advice

Huffington Post

In a recent blog post for Pragmatic Capitalism, Ben Carlson did an excellent job of putting the recent surge of money into passively managed funds in context. The shift to passive funds is still modest The shift from active to passive strategies is understandable, given the historical poor performance of actively managed funds in beating…

How to Find the Best Investment Advice

US News

One of the most difficult aspects of investing involves sifting through the daily barrage of advice offered by “experts.” More often than not, this advice is calculated to enrich the securities industry at your expense. One way to determine whether investment advice has merit is to ask for the data on which an assertion is…

A Closer Look At Evaluating Risk

ETF

Nils Friewald, Christian Wagner and Josef Zechner—authors of the study “The Cross-Section of Credit Risk Premia and Equity Returns,” which appears in the December 2014 edition of the Journal of Finance—studied the relationship between a firm’s default risk and that firm’s equity premium. Their study covered the 10-year period from 2001 through 2010, and estimated…

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