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Fama-French Forum wrote a new blog post titled Inverted Yield Curves and Expected Stock Returns
By Eugene F. Fama and Kenneth R. French We test the hypothesis that inverted yield curves predict negative equity premiums. Using monthly observations for the U.S. and 11 other developed markets, we examine whether shifting from equities to Treasury bills following a recent term structure inversion increases expected returns relative to a passive strategy of simply holding the value weight market. We find no evidence that inverted yield curves predict stocks will underperform bills.
51 days ago
Fama-French Forum wrote a new blog post titled Volatility Lessons
By Eugene F. Fama and Kenneth R. French The high volatility of stock returns is common knowledge, but many investors may not fully appreciate the implications of return volatility. Investors cannot draw strong inferences about expected returns from three, five, or even ten years of realized returns. Those who act on such noisy evidence should reconsider their approach.
358 days ago
Fama-French Forum wrote a new blog post titled Bayes Rule Spreadsheet
By KENNETH R. FRENCH Bayes rule is a way to update your model of the world when you have new information. Suppose we are interested in assessing the probability that a specific hypothesis is true. We start with an initial assessment, called our prior, which is based on all the data we have observed, books we have read, and our other life experiences. This post explains how we should update our initial assessment when we observe new data. (Read the full entry)
573 days ago
Fama-French Forum wrote a new blog post titled Bayes Rule Spreadsheet
By KENNETH R. FRENCH Bayes rule is a way to update your model of the world when you have new information. Suppose we are interested in assessing the probability that a specific hypothesis is true. We start with an initial assessment, called our prior, which is based on all the data we have observed, books we have read, and our other life experiences. This post explains how we should update our initial assessment when we observe new data. (Read the full entry)
601 days ago
Fama-French Forum wrote a new blog post titled Q&A: Are Stock Returns Normally Distributed?
What is the best way to describe the distribution of stock returns—a normal distribution, lognormal, or something else? What should investors do with this information?  (Read the full entry)
643 days ago
Fama-French Forum wrote a new blog post titled Q&A: Small Stocks for the Long Run
In addressing a previous question ("Has the Equity Premium Puzzle Gone Away?"), you suggested that it requires 35 years or more to be reasonably confident of achieving a positive equity premium. Is the time frame similar for the size and value premiums? (Read the full entry)
643 days ago
Fama-French Forum wrote a new blog post titled Q&A: Do Low-Volatility Strategies Produce High Returns?
Baker, Bradley and Wurgler (FAJ 2011) find that low-volatility stocks in the US outperform high-volatility stocks and attribute this apparent anomaly to investor behavioral biases as well as limits to arbitrage. What do you make of their argument? (Read the full entry)
643 days ago
Fama-French Forum wrote a new blog post titled Q&A: Seeking the Inefficient Asset Class
We often hear the claim that some markets are less efficient than others—small company stocks, emerging markets, foreign exchange, and so on. Is there any evidence to support this assertion? (Read the full entry)
643 days ago
Fama-French Forum wrote a new blog post titled Q&A: Why Use Book Value to Sort Stocks?
Data from Ken French's website shows that sorting stocks on E/P or CF/P data produces a bigger spread than BtM over the last 55 years. Wouldn't it make sense to use these other factors in addition to BtM to distinguish value from growth stocks? (Read the full entry)
643 days ago
Fama-French Forum wrote a new blog post titled Q&A: Cap Weighting or GDP Weighting?
What is the merit, if any, in using a country weighting scheme based on Gross Domestic Product (GDP) rather than market capitalization? (Read the full entry)
643 days ago
Fama-French Forum wrote a new blog post titled Q&A: Expected Returns and Socially Responsible Investing
Are expected returns for "socially responsible" strategies lower compared to a conventional approach? (Read the full entry)
643 days ago
Fama-French Forum wrote a new blog post titled Q&A: Front Running and Fair Pricing
What is the relation, if any, between the practice of "front running" trades and the efficient market hypothesis? (Read the full entry)
643 days ago
Fama-French Forum wrote a new blog post titled Q&A: Liquidity and Stock Returns
Is there a liquidity risk factor in stock returns that helps explain differences in average returns? (Read the full entry)
643 days ago
Fama-French Forum wrote a new blog post titled Q&A: Should Investors Diversify Among Government Bonds?
If US Treasury bonds are not risk-free due to inflation risk, does it make sense to diversify a portfolio of government bonds with obligations of other countries? (Read the full entry)
643 days ago
Fama-French Forum wrote a new blog post titled Q&A: Beta and Stock Returns
Do high-beta stocks have high expected returns? Do stocks with historically above-average betas exhibit above-average realized returns? (Read the full entry)
643 days ago
Fama-French Forum wrote a new blog post titled Q&A: Bond Funds or Ladders?
Can you address the pros and cons of short-term bond funds versus laddered bond strategies holding individual issues? (Read the full entry)
643 days ago
Fama-French Forum wrote a new blog post titled Q&A: Seeking the Optimal Country Weighting Scheme
Financial theory suggests that a global value-weight market portfolio is the logical default position for an equity investor seeking the optimal allocation scheme across countries. What are the implications for this approach if we take structural factors into account that encourage a home bias? Australia, for example, offers tax incentives applicable only to local investors, so their citizens earn higher returns than foreign investors do holding the same stocks. Brazil accomplishes the same thing by imposing additional taxes on foreign investors. Would it make sense for foreigners to weight...
643 days ago
Fama-French Forum wrote a new blog post titled Q&A: What Role for Commodities?
There seems to be some confusion about your opinion on the role of commodities in a portfolio, based on a conference presentation for financial advisors in 2004. Have your views changed since then? (Read the full entry)
643 days ago
Fama-French Forum wrote a new blog post titled Q&A: When Does Active Management Shine?
If you are familiar with a recent survey of mutual fund performance by Fundquest (Jane Li, "When Active Management Shines vs. Passive," June 2010), your comments would be appreciated. (Read the full entry)
643 days ago
Fama-French Forum wrote a new blog post titled Q&A: Market Timing with Moving Averages
Some researchers argue that a market timing strategy based on buy/sell signals generated by a 50- or 200-day moving average offers a more appealing combination of risk and return than a buy-and-hold approach. What is your view? EFF/KRF: An ancient tale with no empirical support.
643 days ago