Retirement creates many challenges. Unfortunately, while about 10,000 Americans retire daily, the sad truth is that most people seem to spend less time planning for retirement than they do for a vacation. Anxiety regarding our futures is a common ailment, especially among the millions of Americans rapidly approaching the end of their working years. And…
It’s been well-documented that, in general, investors are risk-averse. This aversion to losses leads many investors to seek “tail protection” strategies. And the most direct way to obtain downside protection is to buy put options. However, purchasing volatility insurance is expensive, because, historically, realized volatility has been well below the level of volatility implied in…
According to a recent poll conducted by The Associated Press-NORC Center for Public Affairs Research, two-thirds of Americans earning between $50,000 and $100,000 would find it difficult to come up with $1,000 to cover an emergency. For those earning less than $50,000 a year, that figure increases to 75 percent. A shocking 38 percent of…
Among the arguments made for investing in hedge funds is that they reduce the tail risks of traditional portfolios. In other words, they are expected to at least avoid the impact of market crises. Unfortunately, the 1998 implosion of Long-Term Capital Management and the global financial meltdown in 2008 demonstrated that this hypothesis is incorrect….
Many investors and advisors who implement multifactor portfolios tend to focus on capturing the value premium over the size premium, often for the simple reason that, historically, the value premium has been larger. Others have even challenged the size premium’s very existence, citing a weak and varying historical record. In both situations, it may be…
Perhaps you’ve heard the expression, “Only the paranoid survive.” Ring a bell? If so, it’s probably because that’s the title of a book by Andrew S. Grove, the former chairman and chief executive of Intel. When I read this book in late 1999, I bought into the need to always be looking for opportunities and…
Robo-advisors have had a significant — and generally positive — impact on the financial services industry. The term typically refers to services that use models and algorithms to invest client portfolios, often in exchange-traded funds (ETFs). A benefit much touted by some of these services is that there’s no interaction with a human advisor. The…
Simon Lack’s first book, “The Hedge Fund Mirage: The Illusion of Big Money and Why It’s Too Good to Be True,” chronicles the history of the hedge fund, highlighting many subtle and not-so-subtle ways that risks and returns are biased in favor of the fund manager. He shows that, while it is certainly true that…
Financial research has uncovered many anomalies (mispricings) that persist even well after they’ve been discovered, the findings are published and their existence becomes widely known. The most well-known anomalies that represent violations of the Fama-French three-factor model (market beta, size and value) are: Net Stock Issues: Net stock issuance and stock returns are negatively correlated….
A long-standing anomaly for efficient markets has been what’s called “post-revision return drift” (PRD). Research into stock returns has found that changes in sell-side analyst recommendations for buying and selling stocks predict future long-term returns in the same direction as the change. Upgrades are followed by positive returns, and downgrades are followed by negative returns….
It seems that in the upcoming presidential election, American voters will be faced with choosing between two candidates with the highest unfavorable ratings in history. It’s either that (at least if the parties’ national conventions go as expected), or a choice not to vote. The unfavorable ratings of both candidates are creating a great amount…
There are many anomalies in investing. It wasn’t easy to isolate the three biggest ones, but here are my choices: You love Warren Buffett, but ignore his advice. Warren Buffett has rightfully been called “the greatest investor of his generation, or ever.” Given his cult-like status, you’d think investors would hang on his every word. For many…
You likely feel as though you don’t have enough time to watch a video that is 17 minutes and 47 seconds, right? But what if watching it allows you to penetrate beneath the scar tissue of busyness and distraction and transform your view of work and the satisfaction you derive from it? Would it be worth it,…
A couple of weeks ago, I wrote a column about the growing tribe of people who value experiences over security in their lives. But there is something that I didn’t say then that I want to emphasize: You don’t necessarily have to trade experience and financial security off against each other. One of my main inspirations for…
It’s logical to believe that corporate managers have a preference for issuing equity at times when they perceive that their company’s stock price is overvalued, or high relative to some benchmark (such as price-to-earnings ratio or book-to-market ratio). What’s more, the academic research on the subject supports this hypothesis—seasoned equity offerings (SEOs) tend to be…