Tag Archives: alpha

May 26, 2020

Outcome-Oriented Solutions: Where Active and Passive Meet

What do presidential debates and an argument between passive and active investors have in common? They are both thrilling, demand the highest levels of rhetorical skills, don’t change audience opinions, and everyone goes home entertained. While presidential debates remain as exciting as ever, the shrillness of conversation between active and passive investors seems to have…

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Apr 30, 2018

Do Dividends Really Pay? (Part 2)

Previously I discussed why preference for dividend-paying stocks may not have a strong theoretical footing, but could be grounded in behavioral and practical reasons. Furthermore, due to possible economic signaling generated by dividends, such strategies may be correlated with widely accepted factors like quality and value. This post demonstrates how specific dividend strategy indices may…

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Oct 6, 2016

The Worst of Both Worlds

For active managers, investment results are partly a function of skill and partly a function of the environment in which that skill is exercised.  Even perfect foresight has only conditional value.  Imagine, for example, a manager who can always identify the top quintile of performers in a given market.  If the top quintile outperforms the index as…

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Oct 10, 2013

The Shrinking Supply of Alpha

Recently we attended a conference at which many hedge fund representatives were present. Not surprisingly, there was much discussion of the ability of hedge funds, and by extension active managers generally, to generate alpha. This raises an obvious question: what is the market’s capacity to produce alpha?  Is there a natural limit to investors’ ability…

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Aug 9, 2013

Good Calls and Bad Calls of Covered Calls

Generally investors use covered calls to earn extra income from investments they think might not have much upside potential.  For example, if a CEO has a very large stock holding in his or her company but doubts the stock price will increase (or decrease much), writing (selling) options on the stock to collect a premium…

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