Volume 14, Number 1, 2016 Vineer Bhansali I discuss ten common themes between non-investment related activities that shed practical and useful light on investing. While readers might not be familiar with these particular activities, I believe that combining analogies from any accumulated skill in intrinsically rewarding activities (also known as hobbies), with a disciplined analytical… Read more
Insight
INSIGHTS: Limits on the Level of Demand a Country Can Afford
Volume 13, Number 4, Fourth Quarter 2015 Jack Treynor With home goods (e.g urban services) output equals demand; when demand increases we put older machines back to work. But the real wage depends on the productivity of the marginal home goods plant. Because money prices go up when the real wage goes down, an increase… Read more
Insights: Consumption, Investment and Insurance in the Game of Life
Volume 13, Number 3, 2015 Harry M. Markowitz Markowitz (1991) proposed the development of a “Game of Life” simulator in which portfolio selection was just one type of move in the financial actions of a subject household. Sherri Grabot’s invitation to Markowitz in the late 1990s to form and join the design committee of GuidedChoice… Read more
INSIGHTS: Investment, Financial System, Real Output and Macro-Risk Management
Volume 13, Number 1, First Quarter 2015 Thomas S. Y. Ho and Sang Bin Lee Loan underwriting standards and quantitative easing are examples of macro-risk management tools that affect the financial sector, which in turn affects real sector outputs. And therefore asset returns, real sector outputs, financial sector, and macro-risk management are interrelated. This paper… Read more
INSIGHTS: Free Cash Flows, Valuation and Growth Opportunities Bias
Hersh Shefrin Volume 12, Number 4, Fourth Quarter 2014 Analysts who base valuations on expected free cash flows are vulnerable to making biased assessments of terminal value because they fail to take into account the implications of disappearing growth opportunities during the terminal period. This leaves their valuations subject to “growth opportunities bias” (GOB). There… Read more
INSIGHTS: Hedge Fund Beta Replication: A Five-Year Retrospective
Peter A. Lee and Andrew W. Lo Volume 12, Number 3, Third Quarter 2014 During the past few years, hedge fund beta replication strategies have become more common. At the same time, questions about the relevance, performance, and applicability of these strategies have been raised in response to the rapidly shifting landscape in the hedge… Read more
INSIGHTS: Mutual Fund Outperformance and Growth
Gregg S. Fisher, Philip Z. Maymin and Zakhar G. Maymin Volume 12, Number 2, Second Quarter 2014 Does better performance lead to more assets? We examine nearly 30,000 mutual funds to determine the effect that a fund’s outperformance relative to its peers has on the fund’s later asset size. We find that a fund that… Read more
INSIGHTS: The Trouble With Corporate Disclosure
Jack L. Treynor Volume 1, Number 4, Fourth Quarter 2003… Read more
INSIGHTS: The Link Between Inflation and the Value of Plant
Jack L. Treynor Volume 12, Number 2, Second Quarter 2014 When negotiators have fixed the money wage, if the central bank wants to change the level of money prices, it has to change the real wage. But the real wage changes whenever the identity—hence the age and productivity—of the marginal plant changes. On the other… Read more
INSIGHTS: A Rule-Based Commodity Index
John M. Mulvey Volume 12, Number 3, Third Quarter 2014 A commodity index is designed as an equal-weighted set of four complementary tactics. The resulting portfolio takes advantage of well-established patterns in commodity markets, including high volatility and the relative independence of the return drivers. These conditions are ideal for achieving rebalancing gains and thusly… Read more