Lawrence Glosten, Suresh Nallareddy, and Yuan ZouManagement Science, forthcomingA version of this paper can be found hereWant to read our summaries of academic finance papers? Check out our Academic Research Insight category What are the Research Questions The [...]
In the short video below, I show how to compute Active Share. The accompanying excel file with the formulas can be found here. I start by computing the active share for two hypothetical funds, and [...]
Multiple events last year reminded us that “price” is a nebulous concept. The most well-publicized price disagreement came in September of 2019 when the public market balked at the price the private market (ok, mainly [...]
Lingchi is the Chinese term for the form of torture we know as “death by 1000 cuts” that was reportedly used from 900 CE until it was banned in 1905. It is also translated as [...]
Peter Thiel has this quote to open his book Zero to One: Every moment in business happens only once. The next Bill Gates will not build an operating system. The next Larry Page or Sergey [...]
What is Smart Beta? Nobody really knows these days. Heck, even the godfather of smart beta, Rob Arnott, is no longer certain. Here's his original definition (from a great piece attempting to bring sanity to [...]
Last year I wrote the following: In 2014 and 2015 there was a wave of ETF company acquisitions by large asset management firms. The reason was simple: if an asset management company was not in the [...]
Morgan Housel had a post on the idea of conflicting skill sets. Morgan makes the following comment: F. Scott Fitzgerald said intelligence is "the ability to hold two opposing ideas in your head at the [...]
ETFs have grown fast, yet there are still some opponents of the structure. However, the general story by ETF opponents has changed over the past 5 to 7 years. Opponents of ETF growth have gone [...]
On October 1st, 1908 Henry Ford introduced the Model T to the world. The power of the Model T was that it democratized the automobile so the average working-class person could afford a car for [...]
The market has recently experienced record low levels of realized volatility and the VIX™ (volatility index) has fallen to historic lows. Moreover, the incredibly popular FAAMG stocksFAAMG is an abbreviation referring to the stocks of [...]
Many in the financial service industry are now using ETFs to build portfolios. Some love the tax-efficiency of ETFs relative to mutual funds, while others use ETFs as trading vehicles. Either way, ETF assets continue to [...]
ETFs and factor investing are on the tip of everyone's tongue these days. Factor investing is being couched as a "new" thing, despite the fact that institutional investors have been deploying these strategies for years. (See this working paper discussing the effective use of smart beta strategies by institutional investors.) However, because factor investing is now directly accessible via ETFs, those who are unfamiliar with factor investing are asking questions about how these "new" funds will affect the market. Two burning questions many investors have: What is the overall capacity of smart beta funds? What is the capacity of momentum-based funds, specifically?
There are several big academic finance conferences that attract the best research and the best researchers in one bullpen -- the AFA and the WFA meetings. We chatted about the AFA event last January (be [...]
The Dark Side of ETFs? Sounds interesting, and in my humble opinion, an image of Darth Vader on page 1 would be a great addition to the paper. The paper, "Is there a dark side to exchange [...]
The ETF industry has been around for over 20 years at this point, but over the past 5 years the ETF industry has captivated the investment world. I've had a front seat on the action, launching [...]
We all hear about the massive move away from active to passive in the US market. We also hear arguments that passive may eat the world and that active management is a zero sum game [...]
Factor investing seems to be everywhere, but the topic is still misunderstood by large swaths of the investing public. Tommi Johnsen and I would like to help bring clarity to the topic and help this [...]
Zahi Ben-David has an excellent new summary paper on the state of academic research on exchange traded funds with colleagues Rabih Moussawi and Francesco Fanzoni.We focused on Zahi for this interview, but Rabih and Francesco have some wonderful [...]
