Drawing the Line on Small-cap Stocks

Trying to define small-cap stocks is like trying to define the “Occupy Everything” movement. What it is depends on whom you ask. The best you can say about what defines small-cap stocks is that they are not large-cap stocks. This, of course, assumes that there is a consensus that defines large-cap stocks, which there isn’t. [...]

Sunspots and Market Prediction

The appearance of dark spots on the Sun occurs on average once per decade. There is evidence dating back thousands of years that suggest the appearance of sunspots coincide with observable changes in human behavior. Recent research asks the question: Can sunspot activity also predict the markets? Sunspots are caused by intense magnetic activity in [...]

Total Bond Index Funds are Not the Total Bond Market

If you are interested in index funds, it is likely that you own shares in a U.S. total bond market fund or ETF. There are roughly $160 billion invested in total bond market funds and ETFs, most of which follow the Barclays Capital U.S. Aggregate Bond Market index or a derivative of it. This index [...]

Investing in Three Dimensions (Part 2 of 2)

In Part 1 of this blog, we explored the theory behind Fama-French Three-Factor Model.  In Part 2, we explore its practical application. The Fama-French Three-Factor Model can be used two ways. First, it can be used to peer into portfolio returns and analyze results. Second, it can be used to engineer portfolios based on refined [...]

Investing in Three Dimensions (Part 1 of 2)

The stock market is a complex animal. It has many dimensions of risk and return. Academics and investors have been trying to understand and capitalize on these dimensions for centuries. Progress is being made. Researchers Eugene Fama and Ken French have conducted extensive research into the dimensions of stock market risk and return. In 1993, [...]