Tail Hedging Is Not As Easy As You Think
Convexity can provide explosive payoffs from unlikely events. It’s a powerful weapon to wield, but like most weapons, it could be inefficient or even dangerous in the hands of the untrained.
Brand Values and Long-Term Stock Returns
An equal-weighted portfolio of Best Brands (BBs) in the U.S. earns an excess return of 25 to 35 bps per month during the period 2000-2020. This result is remarkably robust across various factor models and therefore is not driven by exposure to common (risk) factors. The excess returns of the BB portfolio are not due to firm characteristics, industry composition, or small-cap stocks. We provide evidence suggesting that expensing investments in brands (instead of capitalizing them) and the tendency to underestimate the effect of brand name on generating future earnings are two mechanisms contributing to the excess returns.
Smarter in 10 Minutes with Matt Topley
Time to get smarter in less than 10 minutes.
Welcome to our weekly series, "Smarter in 10 Minutes." This weekly series is aligned with our mission to empower investors through education and is curated by Matt Topley, a 25yr+ vet in the business who currently runs Lansing Street Advisors.
Matt wakes up "Jocko style" every morning and shoots out a daily newsletter (I'm a loyal reader!). The weekly "Smarter in 10 Minutes" is a lower frequency version of his daily newsletter.