Global Impact of Investor Home Country Bias
A large body of research demonstrates that “familiarity breeds investment.” For example, a study by Gur Huberman found that shortly after AT&T was broken up [...]
Myth-busting: Fed Actions and Stock Prices
Does the Fed Impact Stock Prices? McDonald, Puleo and Shadmani Journal of Investing, February 2019A version of this paper can be found hereWant to read our summaries [...]
The Perils (and Inevitability) of Forecasting
I recently experienced one of those fortunate confluence of events that helped me better grasp the relationship between forecasting (which I feel is futile) and [...]
Sector Business Cycle Analysis
There are different investment approaches to identify sector winners and losers, such as price momentum strategies, top down approach based on specific macroeconomic indicators or [...]
What the CFOs Think About the Equity Premium in 2018
Professors John Graham and Campbell Harvey consistently put out great research. One of their innovations in financial research is their annual CFO survey (we've covered [...]
Is The US Stock Market Overvalued? Depends on which Model You ask
When stock prices reach a new high, investors start asking the question: Are stocks overvalued? To answer this question, investors have developed several alternative equity [...]
Treasury Bills Outperform Most Stocks — Say What???
Each morning we peruse a variety of research sites to see if there is anything exciting, new, and intriguing. Rarely does one find something that [...]
Interest Rates and Value Investing
There is still no value in bonds today. The typical knee-jerk reaction to bold bond statements (such as the one above) is as follows: This guy is [...]
Earth to Passive Investors: Lunch is Never Free.
Imagine the following scenario: A strategy that outperforms everything. An ability to scale the strategy at no costs. A beating drum highlighting the infallible logic [...]
Why a Stock Market Double Would Not be Weird
This morning we got a sad note from a famous former hedge fund manager (a friend of the firm who shall remain nameless): What if the [stock] [...]
Tactical Asset Allocation: A Practitioner’s Defense of Return Predictability
The prospect of being able to successfully anticipate and predict future market returns is irresistible to practitioners and academics alike, although success has proven elusive. Many [...]
Was the Financial Crisis Really a Valuation Crisis?
Most people look back at the dot-com bubble and acknowledge valuations were elevated far above historical norms. Investors ignored historically useful fundamentals, such as earnings [...]
Asset Pricing with–and without–garbage.
If you are into consumption-based asset pricing theory and the associated empirical attempts to reconcile the theory with the data from the realized equity premium, garbage is a [...]
Will Bonds Deliver Crisis Alpha in the Next Crisis?
Bonds are often viewed as being great diversifiers due to the perception that they perform well during tough times for stocks. Historically this has been a [...]
A Remarkable View of China’s Official GDP — It’s Not What You Think
A few weeks ago, the WSJ announced that in the third quarter the growth rate of China’s economy had declined to 6.9% -- the lowest [...]
Turn Off Your Chief Economist: GDP Growth Doesn’t Predict Stock Returns
In a sustained effort to try too hard, investors are constantly analyzing and assessing the growth rates of various markets around the world. The key [...]
Daily Academic Alpha: Fed Forecasts–Folly or Fact?
Macroeconomic forecasting is incredibly difficult. The results from this paper suggest that the brainpower of the Fed's 100 person economics team can predict 3 to 6 months out [...]
Chinese Stock Market — Full Meltdown Approaching?
Last night, China's principal benchmark, the Shanghai Composite index, collapsed 7.4%. Ouch! Now that's what we call a drawdown! Hundreds of stocks hit their daily [...]
Sobering 10-Year Market Predictions from CFOs
The Graham-Harvey survey is complete and the expectations of CFOs are available for review. As the figure below highlights, expected returns on the S&P 500 [...]
Low or High Inflation? Nope, Stealthy Government Debt Liquidation!
The Liquidation of Government Debt Carmen Reinhart and M. Belen Sbrancia A version of the paper can be found here A video of Prof. Reinhart [...]