Morningstar Studies Why Active Managers Perform Better in Some Periods

A recent MorningstarA article reports the results of a study conducted on a theory known as Dunn’s Law, which suggests that active managers sometimes outperform indexes due to stylistic differences in their portfolios (using data from the Morningstar Active/Passive Barometer for 12 categories): The firm set up regression models that could test, for example, “if active managers in the large-value category have greater exposure to mid-cap value stocks than their index peers, their success rates… Read More

Mauboussin Offers Insights on Active Management

A recent Forbes article offers comments and insights gathered in a recent interview with Michael Mauboussin, Director of Research at BlueMountain Capital Management (formerly Head of Global Financial Strategies at Credit Suisse): Mauboussin underscores two risks inherent in value investing: (1) buying a cheap stock that “deserves to be even cheaper”—a value trap; or (2) “shunning a statistically expensive stock that represents a good value.” While indexing is a reasonable path for most investors, it… Read More

The Age of FOMO Investing

The current market environment poses a “big psychological quandary,” according to a recent article in Bloomberg. Contrary to what many might think, it argues, long bull markets are not the easiest times for money managers. “The truth is,” is says, “smart investors don’t trade to maximize expected value; they trade to minimize regret. There is nothing worse than ‘buying high’ and then watching the market trade lower. You feel shame because you know you’re the patsy.”… Read More