Q: Does currency risk add value in the fixed income markets? A: As interest rates on high quality bonds have remained relatively low, some investors continue to search for ways to achieve higher returns in the fixed income markets. One strategy that has been in the news frequently is the idea of purchasing non-U.S. dollar…
As I write this on Aug. 10, despite all the economic problems facing investors (such as Greece, the slowing Chinese economy, a bear market in Chinese stocks, the collapse in commodity prices and Puerto Rico’s default), the VIX index, a measure of the market’s expectation of 30-day volatility, had closed above 14 only once since…
It’s not as if investors didn’t already have enough to worry about with the Greek crisis, Puerto Rico’s default, the Iranian nuclear agreement, ISIS, the Fed ending its zero-interest-rate policy in the near future, and gurus such as GMO’s Jeremy Grantham proclaiming that the market is vastly overvalued based on the Shiller CAPE 10 ratio….
Given changes in the jobs market and retirement savings options, how can risk-averse millennial investors in their 20s and 30s secure their futures? CNBC Senior Personal Finance correspondent Sharon Epperson discusses the future for Gen Y workers with certified financial planners Tim Maurer, of The… Read the rest of the article on CNBC.
In my role as director of research for The BAM Alliance, a community of more than 140 registered investment advisor firms, I’m frequently asked both by clients and other advisors to address the issues raised by market “gurus” who make forecasts in the financial media. These forecasts often create anxiety, so investors naturally ask whether…
Slightly more than a decade ago, several studies were published raising the possibility that an allocation to commodities (in the shape of fully collateralized futures) could improve the efficiency of a portfolio due to the diversification benefit (the low to negative correlation of commodities to both stocks and nominal bonds) provided through including this asset…
When it comes to the market’s peaks and troughs, investors often don’t react as rationally as they might think. In fact, in times of extreme volatility or poor performance, emotions threaten to commandeer our common sense and warp our memory. It’s called recency bias. Recency bias is basically the tendency to think that trends and…
The success of the carry trade strategy has led to its widespread proliferation, despite the fact that it contradicts economic theory. In short, this strategy involves borrowing (going short) a currency with a relatively low interest rate and using the proceeds to purchase (going long) a currency yielding a higher interest rate, capturing the interest…
A few years ago, I came across a blog post by a writer named Emma Johnson who declared, in no uncertain terms, that “You. Cannot. Afford. To. Be. A. Full-time. Stay-at-home mom. You just can’t.” I like strong opinions because they make me think and help me clarify my own feelings, and this statement certainly…
Pay attention! We hear this command a lot, often from parents and teachers. People want to remind us to focus on what we’re doing. But I’ve been thinking about a more literal meaning: paying with our attention. Attention is a currency. We choose how to spend it, just like we spend our time, energy and…
The assault on the fiduciary rule proposed by the U.S. Department of Labor (DOL) has intensified. Republicans from the House Committee on Education and the Workforce recently asked Labor Secretary Thomas Perez to “immediately withdraw” the rule. Why? Because they believe it will “reduce investment options and increase costs for retirement savers.” The Financial Industry…
Research into the determinants of fixed-income returns have found that a number of stock and bond market risk factors can be shown to demonstrate explanatory power beyond the standard term-structure variables. Ivelina Pavlova, Ann Marie Hibbert, Joel Barber and Krishnan Dandapani—authors of the paper “Credit Spreads and Regime Shifts,” which appears in the Summer 2015…
It has been my long-held view that most 401(k) plans are a national disgrace. Most 401(k) plans are flawed Part of the problem is that the underlying concept behind how many 401(k) plans are administered is fatally flawed. They assume that employee plan participants are capable of managing their retirement assets, or even willing to…
In their groundbreaking paper, “Digesting Anomalies: An Investment Approach,” Kewei Hou, Chen Xue and Lu Zhang proposed a new four-factor asset pricing model that goes a long way toward explaining many of the anomalies neither the Fama-French three-factor nor subsequent four-factor models could explain. The study, which was published in the March 2015 issue of…
Richard Thaler, a professor of behavioral science and economics at the University of Chicago Booth School of Business, is widely considered one of behavioral finance’s founding fathers (along with Daniel Kahneman and Amos Tversky). His excellent new book, “Misbehaving,” is partly a history of how the field of behavioral finance originated and developed, despite hurdles…