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 …Read More.
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 …Read More.
I want to talk to you about scary markets. For the sake of this particular subject, I want to be blunt and a little bit in your face. So for the next few minutes, please, just think of me less as your friend and more as your Scary Markets Drill Sergeant. O.K.? Great. Now, you may …Read More.
Hey, grads. It’s never too soon to start planning and saving for your retirement (even if it seems far off). Larry Swedroe gives MarketWatch’s Robert Powell his thoughts on what college students and recent graduates can do now to avoid regret later. Find it on MarketWatch.com By clicking on any of the links above, you …Read More.
In life, there are certain nonnegotiables we simply must have. Think food, water and shelter for starters. Nobody will ask, “Is it worth it to eat?” It’s just something you do to stay alive. But deciding what to eat? That’s a different question. Will I eat the bologna or prosciutto? Drink tap water or bottled? …Read More.
Of all the misinformation disseminated to investors, the most pernicious supports the belief that some “investment pro” or pundit has the skill to reliably pick outperforming stocks. This myth is perpetuated by endless blogs and television appearances by “gurus” touting their latest and greatest stock selections. A steady drumbeat A quick review of what passes …Read More.
One of the questions I’m most often asked by reporters covering finance is: “What are the biggest risks facing investors?” My usual response is that the biggest risk confronting most investors is staring right back at them when they look in the mirror. And there’s plenty of academic research to support that view. Much of …Read More.
Allocations by institutional investors to alternative investment classes have risen substantially during recent decades. By 2010, the 1,000 largest sponsors of public pension funds allocated on average more than 17% of their assets to alternatives, including 9% to venture capital and buyout funds and 6% to real estate. At the average university endowment, alternatives in …Read More.
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 …Read More.
Of all the misinformation disseminated to investors, the most pernicious supports the belief that some “investment pro” or pundit has the skill to reliably pick outperforming stocks. This myth is perpetuated by endless blogs and television appearances by “gurus” touting their latest and greatest stock selections. A steady drumbeat Read the rest of the article …Read More.
Last week, we examined a study that found investors’ risk tolerance fluctuates positively with recent market returns. This behavior is in direct conflict with rational economic theory, which dictates that when market returns become negative, wealth contracts and risk aversion should therefore decrease (while risk tolerance should increase). Instead, the authors found that investment losses, …Read More.
Behavioral finance is the study of human behavior and how that behavior leads to investment errors, including the mispricing of assets. Among the many behavioral biases well-documented in the literature is “local” bias—individual investors tend to invest more in stocks that are close to home. There’s also evidence that local bias extends to the behavior …Read More.
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 …Read More.
The recency effect—that the most recent observations have the largest impact on an individual’s memory and, consequently, on perception—is a well-documented cognitive bias. This bias could impact investment behavior if individuals focus only on the most recent returns and project them into the future. Such behavior may lead investors to experience a reduction in their …Read More.
I want to talk to you about scary markets. For the sake of this particular subject, I want to be blunt and a little bit in your face. So for the next few minutes, please, just think of me less as your friend and more as your Scary Markets Drill Sergeant. O.K.? Great. Now, you …Read More.