It has long been known that many investors have a preference for cash dividends. From the perspective of classical financial theory, this behavior is an anomaly. The reason is that, in their 1961 paper, “Dividend Policy, Growth, and …Read More.
Low-volatility strategies have quickly become the darling of many investors, thanks largely to trauma caused by the bear market that arose from the 2008-2009 financial crisis combined with academic research showing that the low-volatility anomaly exists in equity …Read More.
There is no shortage of receptacles clamoring for your money each day. No matter how much money you have or make, it could never keep up with all the seemingly urgent invitations to part with it. Separating true …Read More.
Among the most important decisions investors make is their choice of location for assets within the various alternatives available for retirement (tax-advantaged) accounts. Allocating between a traditional IRA (a pretax, tax-deferred account) and a Roth IRA (a post-tax, …Read More.
Low-volatility strategies have quickly become the darling of many investors, thanks largely to trauma caused by the bear market that arose from the 2008-2009 financial crisis combined with academic research showing that the low-volatility anomaly exists in equity …Read More.
Numerous academic studies advocate for the partial-to-full annuitization of financial assets. Yet despite the evidence, a majority of investors remain reluctant to annuitize for both behavioral and financial reasons. The reluctance to purchase annuities has been called the …Read More.
Among the hot “smart beta” strategies into which investors are pouring assets is quality. For example, the iShares Edge MSCI USA Quality Factor ETF (QUAL | A-84), which is only about three years old, already has $2.7 billion …Read More.
The hypothesis of an efficient market is based on the concept that informed, rational traders would arbitrage away any temporary deviations from “correct” prices. Thus, price efficiency depends upon the actions of arbitrageurs and the availability of arbitrage …Read More.
There’s substantial evidence from the field of behavioral finance that individual investors have a strong preference for investments that exhibit the same characteristics as lottery tickets. Two of these characteristics are high kurtosis (or fat tails) and positive …Read More.
As someone who has long made a living as a financial advisor, I have an inherent bias toward retaining one. I even have one myself, because I believe personal finance is more personal than it is finance. However, …Read More.
Socially responsible investing (SRI) aligns ethical and financial concerns for investors. SRI has gradually developed over time to include the consideration of firms’ environmental, social and governance (ESG) performance. Of note is that, while SRI has evolved, the …Read More.
The 1997 publication of Mark Carhart’s paper, “On Persistence in Mutual Fund Performance,” led to the four-factor model (which added momentum to market beta, size and value) becoming the workhorse model in finance. The next major contribution came …Read More.
One of the problems for the first formal asset pricing model developed by financial economists, the Capital Asset Pricing Model (CAPM), was that it predicted a positive relationship between risk and return. However, empirical studies have found the …Read More.
Among the most important decisions investors make is their choice of location for assets within the various alternatives available for retirement (tax-advantaged) accounts. Allocating between a traditional IRA (a pretax, tax-deferred account) and a Roth IRA (a post-tax, …Read More.
Traditional retirement planning calls for gradually reducing an investor’s equity allocation and increasing the allocation to safe bonds. Perhaps the most well-known example of this concept is the adage that your stock allocation should be equal to 100 …Read More.
