Jitka Hilliard and Jimmy E. Hilliard Under somewhat idealized conditions, investors would achieve the best risk return tradeoff by allocation equity investment in each country equal to its percentage share of world equity capitalization. But factual evidence confirms that domestic investors prefer domestic stocks. For example, domestic investors allocate about 90 percent of their portfolios… Read more
Insights
INSIGHTS: A Brief Review of “The Basis”
James Batterman Credit derivatives provide an alternative to the cash market, allowing investors to manage exposure to a wide range of entities. In a brief case study looking at several relatively volatile corporate names, we set out to describe, in general terms, the nature and behavior of the relationship of CDS, LCDS, and bonds over… Read more
INSIGHTS: Will the Phillips Curve Cause WWIII?
Jack L. Treynor View PDF… Read more
INSIGHTS: Skill – Based Investment Management: The Next Evolution in the Asset Management Industry
Pranay Gupta and Jan Straatman In this paper, we discuss the structure of investment management organizations from a business model perspective, investment structure perspective, and return analysis perspective. We argue that the definition of a business model to align the interest of the asset owner and asset manager is critical to maximizing investment returns. Failure… Read more
INSIGHTS: The Lorenz Curve
Jack L. Treynor For a century, the critics’ favorite example of the failures of capitalism has been the Lorenz curve. They rank households from poorest to richest and then plot cumulative wealth against the cumulative number of households. The critics argue that, if capitalism were fair, the Lorenz curve would be a straight line: the… Read more
INSIGHTS: The Market Maker in the age of the ECN
Wayne H. Wagner Electronic trading venues demonstrate an impressive ability to successfully match trades with high accuracy, low cost, and at remarkable speeds. Are they on track to take over the trading process, or will there always be activities better performed by human beings? View PDF… Read more
INSIGHTS: Phase Shifts
Dean LeBaron The physical world is composed of phase shifts, and we generally accept and understand the implications. The failure to recognize a phase shift that has taken place is exemplified by the perception of investment people about where they stand in the world … even what they stand for. I was part of the… Read more
INSIGHTS: Ben Graham’s Value Approach: Can It Still Work?
Martin Fridson Price collapses in dotcoms and telecoms have fostered a comeback in the fundamental analysis identified with Benjamin Graham (1894–1976). Defining Graham’s method is no simple task, however; his thinking evolved considerably over a 60 year career. Reducing Graham’s approach to a quantitative formula does not produce superior performance. His most celebrated pupil,Warren Buffett… Read more
INSIGHTS: Don’t Count On It! The Perils of Numeracy
John C. Bogle Author John C. Bogle argues that the Information Age has given birth to a worship of hard numbers, and, in turn, the attitude that “If you cannot measure it, it doesn’t matter.” Mr. Bogle disagrees with this syllogism, and offers four “Perils of Numeracy,” detailing the threats that each pose not only… Read more