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Resources

Know Your Risk Inclinations and Investor Personality

What type of investor are you? Larry Swedroe unpacks a CFA Institute Research Foundation brief on risk profiling and tolerance that looks at four investor personalities, and the potentially problematic behavioral tendencies likely to come with each. In my book, “The Only Guide You’ll Ever Need for the Right Financial Plan,” there’s a detailed discussion…

Inverted Yield Curves and Future Equity Returns

A lot of investors are curious to know what an inverted yield curve, if one occurs, might mean for the stock market. In an analysis of Fed data, Jared Kizer concludes such inversions don’t preordain poor equity returns and that other context matters. Investors and advisors alike are curious about the implications of a potentially inverted…

Dividend Policy and Global Stock Returns

Do investors see dividend increases as good or bad news? It depends on whether they’re looking at an individual stock or an entire market. Larry Swedroe reviews a new study into how a country’s aggregate dividend payout rate affects its equity returns. It’s been well-documented that stock prices tend to react positively when companies announce an…

Mutual Fund Benchmark Discrepancies Can Fool Investors

Some active mutual funds have prospectus benchmarks that understate risk and, thus, overstate relative performance. Larry Swedroe unpacks a study that explores how such funds benefit from that overstatement at investors’ expense. Evaluating the performance of actively managed mutual funds generally involves comparing a product’s results with some passive benchmark (the SEC requires that funds…

Persistent Fund Alpha and Active Manager Skill

A recent study found just eight active mutual funds out of 1,000 showed statistically significant alpha. Larry Swedroe examines the research, and offers some additional analysis demonstrating how elusive a prize true alpha really is. Qiang Bu, author of the study “Do Persistent Fund Alphas Indicate Manager Skill?”, which appears in the Fall 2017 issue…

Is Company Size Irrelevant?

Paper results or real-world advantage? Jared Kizer explores whether efficiently managed strategies can, net of fund expenses and trading costs, capture the historically larger value premium found in small-cap stocks. On paper, there is abundant evidence that various return premia have been larger in small-cap stocks compared to large-cap stocks. Table 1, for example, shows…

The Long-Term Evidence on Factor-Based Investing

Is there reason to believe cross-sectional patterns in returns will persist, even after they’re known? Larry Swedroe reviews a study that explores this question using more than 100 years of factor data from around the world. Factor-based investing seeks to capture the long-term premiums highlighted by academic researchers. Factors are the security-related traits/characteristics that give…

Helping You Align Your Values and Goals

What do you hold in highest regard? What is it you want most from life? Wealth Advisor Katie Keary explores these questions through a short exercise designed to help harmonize your deepest values and goals, financial or otherwise. By clicking on any of the links above, you acknowledge that they are solely for your convenience,…

Why Corporate Bonds Aren’t Worth the Risk

Conventional wisdom suggests investment-grade corporate bonds boost risk-adjusted returns. But is it true? Citywire magazine contributor John Coumarianos looks into research on the credit premium from our own Jared Kizer. Conventional wisdom suggests investment-grade corporate bonds boost risk-adjusted returns. But is it true? Citywire magazine contributor John Coumarianos looks into research on the credit premium…

Lottery Stocks Remain a Losing Game

Given the evidence on the poor performance of lottery-like stocks, why would mutual funds choose to invest in them? Larry Swedroe unpacks research that shows it may have something to do with investors’ economically irrational “taste” for such equities. Among the assumptions in the first formal asset pricing model, the CAPM, are that investors are…

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