Tag Archives: Craig Lazzara

Momentum Bubble Deflating?

Yesterday’s decline in the U.S. and global stock markets is striking not simply because of its magnitude but also because it represents a radical reversal of factor returns from the first three quarters of 2018. Readers of our quarterly factor dashboard will recognize this graph, which shows the total return of the S&P 500 and Read more […]

Performance Trickery

Suppose you, as a hypothetical financial advisor, encounter a hypothetical marketer who presents the following hypothetical performance data:   Last Year Trailing 3 Years Trailing 5 Years Trailing 10 Years Portfolio 25.0% 11.9% 16.0% 8.8% Benchmark 21.8% 11.4% 15.8% 8.5% Not only did the portfolio beat its benchmark handily in 2017, says our marketer, but Read more […]

Proximate Cause

Our colleagues at S&P Global Market Intelligence recently completed a paper analyzing the impact of exchange-traded funds on stock-level pricing.  Their work found that “…the impact of ETF trading is transient and of only a modest magnitude under even extreme assumptions” (my italics).  This conclusion is a rebuttal to critics who believe that the growth Read more […]

The Skew Is Not New

Market observers have noted that the S&P 500’s performance so far this year has been dominated by a small number of technology stocks.  This observation is certainly correct, although it’s fair to question the relevance of a statistic based on fewer than two months’ data.  What’s more important is to bear in mind that this Read more […]

Getting What You Pay For

Earlier this week, the Wall Street Journal featured a long article arguing that Morningstar’s star ratings for mutual funds were a “mirage.”   Since these ratings exert a powerful influence over fund flows, their usefulness is obviously of keen interest to investors.  To its credit, Morningstar, although arguing that its ratings are a “worthwhile starting point,” Read more […]

Capitalization and Its Discontents

Last week, readers of the Financial Times were regaled by suggestions that capitalization-weighted index funds were “hugely biased,” “undiversified,” and “too trusting of the market’s judgment on a handful of very large stocks.”  Criticisms of cap weighting aren’t new, of course, and at least in the near term seem not to have been very effective Read more […]

Market Agnosticism

This weekend’s Financial Times brought John Authers’ provocative article on the frequency of financial crises.  Along the way, John gives us some excellent advice: “We should all work on the assumption that we do not know what will happen next.” John’s view of crisis prediction applies equally to the quotidian work of investment management.  Since we don’t Read more […]

Confusing Means and Ends

This morning’s Wall Street Journal informs us that the growth of exchange-traded funds has “propelled” this year’s surge in equity prices.  “Booming demand for passive investments is making exchange-traded funds an increasingly crucial driver of share prices….Surging demand for ETFs this year has to an unprecedented extent helped fuel the latest leg higher for the Read more […]

The Wrong Diagnosis

This morning’s Wall Street Journal described how “a $1.4 billion ETF gold rush” supposedly has disturbed the pricing of mining stocks around the world.  $1.4 billion turns out to be the incremental cash flow into a single exchange-traded fund designed to track an index of the gold mining industry, including some relatively small-capitalization companies.  These Read more […]

No News, and No Implications

This morning’s Wall Street Journal reported, rather breathlessly, that “U.S. bond yields are topping a key measure of the dividends that large U.S. companies pay—a shift that has broad implications for investors….”  The headline was triggered by the observation that the 2.50% “yield on the 10-year U.S. Treasury note…exceeded the 1.91% dividend yield on the Read more […]