The following report was produced by our research team and we felt it was worth sharing for discussion and comment. The recent price action in crude oil prompted us to spend a little effort thinking about how to manage around negative prices.
Keep ReadingBehavioural Finance
Skis and Bikes: The Untold Story of Diversification
In most parts of Canada we have very distinct seasons. Some months of the year are temperate and relatively dry, while other months are cold and snowy. As a result, most Canadian towns of any size have stores that sell skis and bikes. Of course, they don’t inventory both skis and bikes at …
Keep ReadingPart 2: Evidence Based Investing is Dead Long Live Evidence Based Investing!
Edesess’ case against evidence-based investing rests on three general assertions. There is a very real issue with using a static t-statistic threshold when the number of independent tests becomes very large. Financial research is often conducted with a universe of securities that includes a large number of …
Keep ReadingEvidence Based Investing is Dead. Long Live Evidence Based Investing! Part 1
Michael’s case against evidence based investing rests on three general assertions. First, there is a very real issue with using a static t-statistic threshold when the number of independent tests becomes very large. Second, financial research is often conducted on a universe of securities that includes a large number of …
Keep ReadingBold, Confident & WRONG: Why You Should Ignore Expert Forecasts
If you read the paper, watch the news, and listen to investment experts you are doing it all wrong. There are no market wizards; the emperors have no clothes; most people are ‘swimming naked’. The following paragraphs offer abundant and incontrovertible evidence …
Keep ReadingIt is the season for Bold Prediction
Why are we giggling like a small child in a candy store? Because at least one of these groups is guaranteed to be embarrassingly wrong, and there’s a pretty good chance that both groups will end the year scrambling for excuses as to why their crystal ball was, well, cloudy.
Keep ReadingForget active vs. passive. It’s all about factors
We just love a good debate, and there seems to be quite a heated debate at the moment about the relative utility of passive versus active investing. Perhaps this debate is as timeless as investment management itself, but a flurry of recent studies may have finally armed passive advocates with enough ammunition to settle the argument once and for all.
Keep ReadingA fool thinks himself to be wise
As a team whose principals have spent thousands of hours accumulating academic credentials and experience in a fairly narrow field of expertise – public markets – we are endlessly fascinated with peoples’ optimism about their ability to succeed independently in this hyper-competitive domain.
Keep ReadingThe Most Important Concept in Wealth Management
Most investors miss the most important concept in wealth management because they are laser focused on returns as the primary benchmark of success. This propensity to chase returns is magnified during periods when markets are shooting the lights out, as investors become acutely aware of how their portfolio is performing relative to whatever index is attracting the most attention at the time.
Keep ReadingTriumph of the Ostriches
Throwing caution to the wind has been very profitable – so far. But if history is any guide, there are many reasons for investors to consider taking a much more cautious stance.
Here are the facts: according to every valuation metric that matters (i.e. with statistical significance through history), stocks are quite expensive.
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