Cochrane: Fama's Nobel Prize
John Cochrane explains Gene Fama's many contributions to finance. UPDATE, November 8: Professor Cochrane added to and refined his commentary on Gene's Efficient Markets work here.
View ArticleQ&A: Financial Innovation -- A Blessing or a Curse?
Real economic risk appears to have decreased over time as global economies have become more advanced and diversified. But market risks appear to have increased due to innovative financial instruments...
View ArticleQ&A: Are Stocks Safer in the Long Run?
Lubos Pastor and Robert Stambaugh argue that long-horizon stock investors actually face more volatility than short-horizon investors. How should investors interpret this evidence? KRF: The...
View ArticleQ&A: Seeking the Best Inflation Hedge
How do TIPS and one-month Treasury bills compare as inflation hedges? EFF: TIPs are obviously a great hedge against inflation, but there is still uncertainty about the short-term real return on...
View ArticleQ&A: Can Investors Profit from Momentum?
A prominent money management firm has recently launched several mutual funds that seek to exploit the positive momentum effect in stock prices. Why does this well-publicized anomaly persist and under...
View ArticleQ&A: Do Fundamentals Tell Us When Stocks Are Overpriced?
In their book Valuing Wall Street published in early 2000, Andrew Smithers and Stephen Wright claim that the q ratio popularized by Nobel laureate James Tobin reliably identifies periods of extreme...
View ArticleQ&A: Bankrupt Firms: Who's Buying?
Why do shares of widely held bankrupt firms such as GM often trade well above zero even though the interests of common stock holders appear almost certain to be eliminated in reorganization? Is this...
View ArticleQ&A: Does Gold Belong in My Portfolio?
Based on spot price data from January 1970 through February 2010, the average return on gold bullion was almost exactly the same as the S&P 500 at 88 basis points per month. Volatility was...
View ArticleQ&A: Semi-Variance: A Better Risk Measure?
Is semi-variance a more useful measure of downside risk than standard deviation? My clients aren't worried about market surges, they're worried about market crashes. (Read the full entry)
View ArticleQ&A: Is Insider Trading Beneficial?
Some economists argue that prohibiting insider trading does more harm than good by reducing the flow of useful information. Do you agree? (Read the full entry)
View ArticleQ&A: Reducing Risk with Options
Can put or call options be used to achieve a more predictable risk-return tradeoff? For example, should I purchase put options to minimize equity portfolio losses? (Read the full entry)
View ArticleQ&A: Public vs. Private Equity
Should investors expect higher returns from private equity investments as compensation for the lack of liquidity? Does private equity offer a useful diversification benefit in a balanced portfolio?...
View ArticleQ&A: The Limits of Arbitrage
To what extent do the limits of arbitrage (Schleifer and Vishny, 1997) discredit the idea of market efficiency? (Read the full entry)
View ArticleQ&A: Are Chief Executives Overpaid?
What model for executive compensation at public companies would you like to see? Should shareholders vote on these matters? (Read the full entry)
View ArticleQ&A: Are Treasury Bonds Risk-Free?
Does the deteriorating financial condition of the U.S. government diminish the appeal of U.S. Treasury securities as a risk-free asset? Should investors consider adding government securities from other...
View ArticleQ&A: Dividends: Is Bigger Better?
Does an equity strategy focusing on stocks with above-average dividend yield offer an appealing risk/reward tradeoff? Have dividend-paying stocks outperformed non-dividend payers in the U.S.? (Read the...
View ArticleQ&A: High Frequency Trading and the "Flash Crash"
The "Flash Crash" on May 6, 2010, is generally attributed to the growth of automated or "high frequency" trading programs. How have they affected market volatility and security valuation and what, if...
View ArticleQ&A: Commodity Exposure through Stocks?
How can investors achieve exposure to commodities by investing in stocks? (Read the full entry)
View ArticleQ&A: A "Stock Picker's Market"?
Many experts characterize the current environment as a "stock picker's market." Is there any evidence that stock selection is more successful under certain market conditions? (Read the full entry)
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