Diversify and Conquer

Academics and investment practitioners have long performed deep dives on momentum as a source of excess return premia. Analysis that focuses on value, small-cap and other accounting-based factors (book to market, capitalization, etc.) is a more recent addition to the research canon, but the seminal papers by Fama and French Continue Reading

Prediction is difficult, Nils Bohr famously warned — especially about the future. The caveat needs no explanation in economics and finance, although a bit of clarification is required, starting with the obvious. If you spend more than 20 minutes studying the history of forecasting that routinely populates the world of Continue Reading

Supreme Court Justice Potter Stewart famously punted when trying to define pornography, although he wryly admitted that “I know it when I see it.” The same might be said of financial bubbles. When The New Yorker asked Eugene Fama, a founding father of indexing, to comment on the so-called credit Continue Reading

In the search for the holy grail of portfolio design – robust diversification – it’s tough to beat the classic stock-bond mix. If one side of this asset allocation dance is sliding (or rising), history shows that there’s a good chance the partner will be rising (falling). But is too Continue Reading

At the core of modern finance theory is a simple but powerful idea: There’s a price tag for earning a higher return – higher risk. Defining risk is a slippery concept, although not for want of trying with an ever-lengthening list of quantitative metrics. But more choices don’t always lead Continue Reading