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Dividend Policy and Global Stock Returns

Do investors see dividend increases as good or bad news? It depends on whether they’re looking at an individual stock or an entire market. Larry Swedroe reviews a new study into how a country’s aggregate dividend payout rate affects its equity returns. It’s been well-documented that stock prices tend to react positively when companies announce an …Read More.

Mutual Fund Benchmark Discrepancies Can Fool Investors

Some active mutual funds have prospectus benchmarks that understate risk and, thus, overstate relative performance. Larry Swedroe unpacks a study that explores how such funds benefit from that overstatement at investors’ expense. Evaluating the performance of actively managed mutual funds generally involves comparing a product’s results with some passive benchmark (the SEC requires that funds …Read More.

Persistent Fund Alpha and Active Manager Skill

A recent study found just eight active mutual funds out of 1,000 showed statistically significant alpha. Larry Swedroe examines the research, and offers some additional analysis demonstrating how elusive a prize true alpha really is. Qiang Bu, author of the study “Do Persistent Fund Alphas Indicate Manager Skill?”, which appears in the Fall 2017 issue …Read More.

Is Company Size Irrelevant?

Paper results or real-world advantage? Jared Kizer explores whether efficiently managed strategies can, net of fund expenses and trading costs, capture the historically larger value premium found in small-cap stocks. On paper, there is abundant evidence that various return premia have been larger in small-cap stocks compared to large-cap stocks. Table 1, for example, shows …Read More.

The Long-Term Evidence on Factor-Based Investing

Is there reason to believe cross-sectional patterns in returns will persist, even after they’re known? Larry Swedroe reviews a study that explores this question using more than 100 years of factor data from around the world. Factor-based investing seeks to capture the long-term premiums highlighted by academic researchers. Factors are the security-related traits/characteristics that give …Read More.