Human Error and Behavioral Biases

A recent article in Morningstar addresses the subject of behavioral biases and how they affect investment decision-making. “Most investors,” it says, “could improve their portfolio risk management by turning the spotlight on themselves and recognizing when their behavioral biases may lead to bad decisions that hurt performance.” The article groups these biases into two categories: emotional biases and cognitive errors, noting that investors would be well-served to identify which they are more vulnerable to: Emotional… Read More

Tepper to Return Outside Money

A recent Bloomberg article reports that billionaire David Tepper intends to return money to outside investors, “following other marquee names who quit the struggling hedge fund industry to manage their own capital.” According to the article, the founder of Appaloosa Management–“one of the most revered hedge fund managers”– hasn’t made a final decision on timing. It explains that the move comes after Tepper’s purchase last year of the football team the Carolina Panthers, sparking concern… Read More

Some Lessons For My Former Investing Self

By Jack Forehand (@practicalquant) One of the most dangerous games we all can play in investing is the game of looking back and thinking about what we should have done. Hindsight bias leads us to believe that we should have known all sorts of things that there was no way to know at the time, and that leads to conclusions that would have been very difficult to draw with the information that was available then.… Read More

Swedroe Reviews New Book on Behavioral Investing

In a recent article for Institutional Investor, BAM Alliance Director of Research Larry Swedroe included Daniel Crosby’s new book The Behavioral Investor as one of his favorites on the study of behaviorial finance and how human nature “leads to investment errors, including the mispricing of assets.” “Crosby begins with a look at the sociological difficulties surrounding investment decision-making,” Swedroe explains, adding, “He then examines how the brain and body are poorly matched to the task… Read More

Soros Wagers on Scandal-Hit GAM

Billionaire investor George Soros, who rose to fame in the wake of a successful bet against the Bank of England in 1992, disclosed a 3% stake in the Swiss firm GAM Holding AG “after the asset manager lost two-thirds of its value over a scandal involving a former star bond trader.” This according to a recent article in Bloomberg. The article reports that GAM is “still bleeding assets” to the tune of $28 billion since… Read More

Increased Volatility Encourages Stock Pickers

The uptick in market volatility over the past 18 months is leading some individual investors to believe the market has “reached a point where picking the right stocks matters more than throwing money into index-tracking funds,” according to a recent article in The Wall Street Journal. The article says that Wall Street analysts are attributing a combination of drivers, including a “buy-the-dip” mentality, an accommodative Fed, solid economic indicators and increased share price dispersion.  They… Read More

A First: U.S. Passive Matches Active AUM

As of the end of April, assets in passive domestic stock funds reached the level of those held by active managers–$4.3 trillion. This according to an article in Institutional Investor. “According to Morningstar,” the article reports, “parity between active and passive has been the inevitable result of twelve years of relentless outflows from active funds coupled with a steady flow into passive assets.” The trend, the article says, represents a signal that the industry has… Read More

Ray Dalio: Risky Days Ahead in U.S.-China Trade War

Billionaire investor Ray Dalio, founder of Bridgewater Associates, said that he sees the tension between the U.S and China as more than a trade war, adding that more stringent export controls could trigger a major escalation. This according to a recent article in Bloomberg. Using the example of Huawei Technologies Co., Dalio wrote in a recent LinkedIn post that the U.S. move to shut off supply to the company represents a step in “weaponizing” export… Read More

Jim Stack: Market Insights from Montana

A recent article in Barron’s shares market insights from Jim Stack, a Montana-based financial advisor whose money management firm is known for its “willingness to reduce stock exposure when markets appear overvalued.” Here are some highlights: ยท      On recession risk, Stack points out that “no recession in U.S. history has been forecast in advance by an poll of economists,” adding that investors should instead look for warning signs or “factors that signify it is late in… Read More

Short Seller is Betting on Market Crash

In a recent interview with Bloomberg, Horseman Capital’s Russell Clark discussed his long career of being a contrarian and how, “with resolve virtually unheard of in the industry, he’s been betting on stock declines for more than seven years.” But so far, his skepticism isn’t paying off, the article reports, adding that Horseman Global lost 15 percent of its value in the first quarter amidst a rise for the S&P 500 of 13 percent. The… Read More