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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.

Lottery Stocks Remain a Losing Game

Given the evidence on the poor performance of lottery-like stocks, why would mutual funds choose to invest in them? Larry Swedroe unpacks research that shows it may have something to do with investors’ economically irrational “taste” for such equities. Among the assumptions in the first formal asset pricing model, the CAPM, are that investors are …Read More.

Don’t Exclude Emerging Markets

Does the current empirical evidence still suggest there’s a significant benefit to including emerging markets stocks in a globally diversified portfolio? Larry Swedroe makes his case for the prudent investment strategy. Thirty years ago, emerging markets made up only about 1% of world equity market capitalization, and just 18% of global GDP. As such, the …Read More.