I received many responses from my last post about how Delta Pilots’ new Defined Contribution (DC) plan stacks up against the old Defined Benefit (DB) plan. First, I would like to thank each of you who responded. I appreciate that you took the...
Read moreThe Fallacy of Time Diversification: Part 2
In my last post I made the argument that time does not necessarily reduce the risk of an investment since the standard deviation of total return actually increases with time. I discussed how you have to take into account the direction and...
Read moreThe Fallacy Of Time Diversification: Part 1
If you read my blog regularly you know I am constantly preaching about diversification. Normally I am talking about incorporating multiple asset classes and style premiums together in order to increase return while reducing volatility. Many...
Read moreDon’t Confuse Strategy With Outcome
Last year was a great year for US stocks. In fact the Russell 3000 index returned 33.55%. This bested most other indices. For example the MSCI EAFE Index (Europe/Asia/Far East) returned 22.78%, the MSCI Emerging Market Index returned -2.6%, the...
Read moreHumans Being Human
Along with Gene Fama and Lars Hanson, Robert Shiller was recently awarded the Nobel Prize in Economic Sciences for his impressive contribution to the understanding of asset prices. His biggest contributions are in the area of behavioral finance...
Read moreGene Fama Wins The Nobel Prize In Economic Sciences
If you are a regular reader of this blog you know I frame my investment philosophy around research performed by academia. Gene Fama’s research has definitely influenced the way I think about markets more than any other academic. He shares the...
Read moreMore About Mortgages And The Math of Bonds
In last week’s post we looked at some of the pros and cons of paying off your mortgage (most of them were pros). An argument for not paying off your mortgage was that if interest rates rise you may eventually be in a positive arbitrage position –...
Read moreMore About Style Premium Diversification
Last week I posted an article about incorporating style premiums into a portfolio and how it will increase efficiency (higher return per unit of risk). Some readers had some questions that I will address today. The first question: when looking at...
Read moreThe Size Premium
Continuing with our series on style premiums, today I will talk about the size premium or the tendency for small cap stocks to outperform large cap stocks...
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