Institutional investors largely behave in line with rational asset pricing models. Yet at the same time, they strongly disagree with each other, and this disagreement has important implications for markets.
Why is carry doing so well? How did this convergent strategy end up benefiting from one of the biggest geopolitical shocks in modern times? By examining this question, investors will be better informed about how to build better portfolios and whether carry should have a strategic slice of the portfolio pie.
After years in what can be now called one of the worst (if not the worst) period for value investing, many investors have packed their bags and called it quits. We’ve heard this be said over and over again; and yet, many of their arguments look extremely compelling. So are they in the right? Let's examine.
Success lies not in collecting exotic anomalies like rare zoo specimens, but in understanding the economic forces that drive sustainable return patterns. Focus on strategies with solid macroeconomic foundations, maintain healthy skepticism about new discoveries, and always account for implementation costs.
This paper shows how return expectations are formed: largely via a common “building-block” model (dividend yields, earnings growth, inflation, P/E changes), and how they vary across asset classes, time periods, and institutions.
This paper builds a new measure of “equity market volatility” using newspaper articles and finds that policy-related news (fiscal, monetary, trade, regulation) explains a large share of volatility spikes.
Gold has jumped from sleepy sideshow to dominant market narrative in a short span of time. For years, owning gold did not move the needle, and only introduced unnecessary noise to investors' portfolios. Then, in 2023, things started silently shifting in the background. Today, after a parabolic mid-summer move followed by a short correction, investors are now asking themselves: is it too late to buy gold?
We're going to examine the market’s current concentration and valuation to better understand return expectations going forward. But reader beware; this isn’t some bold macro prediction to scare you away from sensible investing. It’s a reminder that markets move in cycles, valuations eventually matter, and history has a way of humbling even the most confident forecasts.
On April 2nd, President Donald Trump announced sweeping tariffs against nearly every foreign economy. A blanket 10% tariff applied to all imports, even from places like the Heard and McDonald Islands, which have no permanent residents, and up to 50% for specific countries like Lesotho, Cambodia, and Vietnam. The reaction was immediate. Stocks cratered, risk assets sold off, and confidence evaporated almost overnight. Why such a sharp response? Tariffs themselves aren’t new; countries use them all the time. But this felt different, and for investors, it raised an unsettling question: was this another 2020-style shock in the making, or just a temporary scare?
US exceptionalism provided the same explanation for the outperformance of US stocks in the 1990s. However, that regime changed. From 2000-2007, while the S&P 500 Index returned just 1.9% per annum (underperforming riskless one-month Treasury bills by 1.3% per annum), the MSCI EAFE Index returned 5.6% per annum, and the MSCI Emerging Markets Index returned 15.3% per annum.
This paper seeks to address three pivotal questions that explore the broader economic and social impacts of IPO activity, particularly its role in influencing stock market participation through localized attention and wealth effects.
Since 2010, the S&P 500 has beaten the International Developed market in all but three years. This led the U.S. market to outperform International Developed by an astounding 8.14% compounded per year. Wowza! Talk about pain if you’re a global investor.
This study addresses a critical gap in financial forecasting by improving the accuracy of long-term expected return (E(R)) predictions. By evaluating various frameworks and proxies out-of-sample, free from biases like look-ahead bias, it provides more reliable methods for investors to make informed decisions about asset allocations.
Because the Sahm rule focuses solely on the unemployment rate, caution is warranted before assuming it is signaling a recession.
Knowing what economic regime we might be in won’t provide you with the crystal ball allowing you to foresee what geopolitical events will drive markets, whether “black swans” will appear, or identify whatever unexpected events or government policy actions will drive markets.
This paper explores the applicability of the Bernanke-Blanchard (BB) model across diverse economies, revealing commonalities and differences in inflation dynamics post-pandemic.
To date, the best metric we have for forecasting future equity returns and the ERP is current valuations. An interesting question is whether more complicated methods using newly developed machine learning models can provide superior forecasts.
The findings from this Hidden Markov Model analysis provide policymakers with valuable insights into the nature and behavior of inflation regimes. This information can inform the design and implementation of monetary, fiscal, and regulatory policies to effectively manage inflation, stabilize the economy, and promote sustainable economic growth.
This article studies whether index investing has implications for the informational efficiency of stock prices.
This example of research on political beta is an example of applying portfolio theory to problems associated with global politics.
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