To Guide or Not to Guide

An investigation shows that investors suffer when firms stop giving quarterly earnings guidance.

The Conscientious Investor

Socially responsible investing is neither as profitable nor as responsible as advertised. But if you insist, here’s how to do it right.

Henry Blodget

The first problem with labeling a particular style of investing “socially responsible” is that it suggests that other kinds of investing are not. So it’s no wonder many people find the concept silly or offensive.

At some level, after all, our very economic system is socially problematic. The benefits accrue disproportionately to owners (investors, this means you), who make fortunes off the labor of rank-and-file employees. … [ Read more ]

Henry Blodget

But relationships that seem causal and permanent in one market era often vanish in the next, taking many “superior investment strategies” down with them. Today’s markets are also annoyingly efficient. The more studies that demonstrate that socially responsible stocks do better than regular stocks, the more investors will rush to buy them (and not just for “the greater good”). The resulting torrent of money flowing … [ Read more ]

The Hedge Fund as Activist

Do hedge funds improve management of the companies they invest in? A new study by Harvard Business School professor Robin Greenwood and coauthor Michael Schor argues that, in fact, hedge funds create shareholder value through anticipation of change, not necessarily delivering it.

The Interpretation of Financial Statements

Benjamin Graham has been called the most important investment thinker of the twentieth century. As a master investor, pioneering stock analyst, and mentor to investment superstars, he has no peer.

This volume is Graham’s timeless guide to interpreting and understanding financial statements. It has long been out of print, but now joins Graham’s other masterpieces, The Intelligent Investor and Security Analysis, as the three priceless keys … [ Read more ]

The Bright Side of Bubbles

Despite their cost, speculative bubbles may have an enormous upside, a new book argues.

Long-Term Consumption: A Microeconomic Approach to Studying Asset Pricing

A fundamental economic question is the tradeoff between investment and consumption and how it determines asset prices in the macroeconomy. New research studies the relationship between consumption and asset prices using microeconomic data.

Measuring Stock Market Performance

Total Returns to Shareholders (TRS or TSR) doesn’t reflect a company’s performance or health. What does?

More Than You Know: Finding Financial Wisdom in Unconventional Places

Mauboussin is not your average Wall Street equity analyst, writing investment recommendations whose topical interest wanes a few days after the report is issued. His strategy reports begin with scientific findings from diverse fields, then show why an investor should care. This book is a collection of 30 short reports, revised and updated, covering animal behavior (“Guppy Love: The Role of Imitation in Markets”), psychology … [ Read more ]

Training the portfolio

Interest is rising in the Treynor-Black model for portfolio selection, which can provide a new application to enterprise-wide portfolio optimisation, says Ross Miller.

M.P.T. – Modern Portfolio Theory

Modern portfolio theory is the philosophical opposite of traditional stock picking. It is the creation of economists, who try to understand the market as a whole, rather than business analysts, who look for what makes each investment opportunity unique. Investments are described statistically, in terms of their expected long-term return rate and their expected short-term volatility. The volatility is equated with “risk”, measuring how much … [ Read more ]

The Intelligent Investor: The Definitive Book On Value Investing

Whether you’re buying whole companies or just a few shares, there’s no better investing how-to book than this. But don’t take my word for it; the book is famously revered by no less an intelligent investor than Warren Buffett. Graham’s advice is simple — any stock you buy should be worth more than it costs — and he provides a method for determining a stock’s … [ Read more ]

Love Your “Dogs”

Conventional wisdom dictates that businesses invest in their best performing units, and sell, shutter, or siphon off resources from their worst performers. But what if the conventional thinking is wrong? Leading behavioral economists now believe that investing in your “dogs,” or poor performing units, could bring far better returns than investing in your “stars,” or best performing units. It’s a counterintuitive strategy that could lead … [ Read more ]

Reminiscences of a Stock Operator

Stock investing is a relatively recent phenomenon and the inventory of true classics is somewhat slim. When asked, people in the know will always list books by Benjamin Graham, Burton G. Malkiel’s A Random Walk Down Wall Street, and Common Stocks and Uncommon Profits and Other Writings by Philip A. Fisher. You’ll know you’re getting really good advice if they also mention Reminiscences of a … [ Read more ]

My Life as a Quant: Reflections on Physics and Finance

Emanuel Derman was one of the first physicists to move to Wall Street, and his career paralleled the growth of quantitative trading over the past twenty years. In My Life as a Quant , he traces his transformation from ambitious young scientist to managing director and head of the renowned Quantitative Strategies group at Goldman, Sachs and Co. Derman’s tale recounts his adventures with quants, … [ Read more ]