What’s the right allocation to a risky asset class like emerging markets stocks? Since the launch of the MSCI EAFE EM index that tracks emerging markets in 1988, the returns have outpaced the S&P 500 by 0.33 percent per year: 10.56 percent versus 10.23 percent. (All data from Jan 1988 through Jun 2016). As you might expect, the extra return has come with extra risk: the emerging markets index has… Read More
I heard a funny exchange between Gene Fama and Dick Thaler, two University of Chicago professors that sit on opposite sides of the debate about whether markets are efficient. If you’ve got 45 minutes, I recommend watching the whole discussion by clicking here. As an example of market inefficiency, Thaler told a funny story about a closed-end mutual fund with the ticker symbol: CUBA. The Herzfeld Caribbean Basin fund doesn’t invest… Read More
For almost 50 years, one of the most controversial ideas in finance is that markets are efficient as presented by Gene Fama’s Efficient Market Hypothesis (EMH) in 1966. Let’s start with a simple definition of EMH: Current market prices incorporate all available information and expectations and are the best approximation of intrinsic value. In some ways, it’s such a simple statement that it’s a little surprising that it’s so controversial…. Read More
Thankfully, Greece has been out of the headlines for a few weeks as the Mediterranean country continues to negotiate their third bailout in five years. In the meantime, some of the capital controls are beginning to lift: banks reopened on July 20 (although withdrawals are still severely limited) and yesterday, the Greek stock market opened again, albeit -16 percent lower. Obviously, that’s an enormous decline – the S&P 500 has… Read More
Wednesday night, I was reading a new paper by some of the principles at AQR titled, ‘Fact, Fiction and Value Investing.’ You can find a copy here and this follows on a paper that they wrote last year called, ‘Fact, Fiction and Momentum Investing (which you can find here).’ Now that you’ve read our primers on value and momentum investing, no further explanation is required, although if you want a refresher, you… Read More
A little before my time, comedian George Carlin did a bit called ‘seven dirty words’ that were unsuitable for television. Although the words are fairly commonplace now, I’m glad that the networks and basic cable keep them off of the air until my kids are in bed. Finance has a few dirty words as well, but unlike Carlin’s list, I can use them here to describe how we mostly, but… Read More
