When we left off in Part 1, we promised to examine how select Global Tactical Asset Allocation products stack up against the Global Market Portfolio from the perspective of several performance measures – particularly Sharpe ratio, alpha and information ratio.
Keep Reading2014
Measuring Tactical Alpha, Part 1
Grinold linked investment alpha and Information Ratio to the breadth of independent active bets in an investment universe with his Fundamental Law of Active Management. Breadth is often misinterpreted as the number of eligible securities in a manager’s investment universe, but this ignores the impact of correlation.
Keep ReadingThe Ever-Depressing SPIVA: 2014 Mid-Year
The Mid-year S&P Dow Jones Indices SPIVA Canada Scorecard is out, and it’s everything that we’ve come to expect from the discretionary stock-picking world. But this time was unique even by our standards in that, for the first time in memory, not a single Canadian Dividend & Income equity fund outperformed it’s benchmark over the last 5 years.
Keep ReadingWhy Monkeys Hate Losing Grapes and You Hate Losing Money
In a famous experiment popularized by the the 2009 book SuperFreakonomics, Dr. Keith Chen conditioned Capuchin monkeys to understand the utility of money to purchase treats. It was compelling enough that the monkeys showed demand elasticity – they bought less of certain treats when prices rose and more of other treats when they fell – but the real breakthrough was when the researchers introduced two gambling games.
Keep ReadingDon’t Invest in What You Know
It’s common market wisdom that non-professional investors should “invest in what you know.” This makes intuitive sense, since we obviously have an informational edge in sectors that we work in. Furthermore, it’s scary and requires extra effort to investigate areas of the market in which we have no experience.
Keep ReadingHow to Waste a Ton of Time on Unimportant Decisions, Part 2
Wasting time is the bane of our existence. We’re not talking about laziness or procrastination; that’s a completely different thing. What we’re talking about is Fredkin’s Paradox and the human condition that requires decisions be “informed” even in circumstances where:
Keep ReadingHow to Waste a Ton of Time on Unimportant Decisions, Part 1
I spent an hour this week trying to decide whether to start Brian Quick or Jay Cutler in my fantasy football league. If you don’t know who those players are, that’s fine because it doesn’t matter. What matters is that Quick was projected to score 12.38 points and Cutler was projected to score 12.41 points.
Keep ReadingNO, This Pension Fund is NOT Daytrading Your Retirement Funds, With Up to 500% Leverage
I recently came across an an article with the headline “This Pension Fund Is Daytrading Your Retirement Funds, With Up To 500% Leverage.” It linked through to the article from Pension360 entitled (only slightly less sensationally) “Is This Pension Fund Day Trading With Its Portfolio?”
Keep ReadingSquare Root of 2
Since the days of the Babylonians it’s been known that square root of 2 – which I’ll shorthand as SQR(2) from here on out – has a lot of numbers in the decimal places. And even if they didn’t know specifically that it was irrational, with their available mathematical knowledge, they came up with …
Keep ReadingRepeated Games & Airline TV
Pricing models are something that have long fascinated us. So compelling is the topic that it’s a well known form of entertainment amongst economists to try and decipher how businesses set prices. This is especially fun when there’s a good reason to think that there might be something unintuitive and more interesting than simple supply and demand.
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