Roger Ibbotson on the Price of Popularity

People tend to pay more for brand name consumer products than generics–and stocks are no different, says Yale professor Roger Ibbotson. This according to an article in CFA Institute. “Popular stuff has higher valuations but lower expected returns,” he said during a talk at the CFA Institute Annual Conference, citing the example of how Bayer aspirin attracts a significant consumer base even though it is more expensive than the generic version (that delivers the same… Read More

Can Investors Time the Market By Going Against the Flow?

Yale professor Roger Ibbotson and Research Affiliates founder Rob Arnott debated the challenges and opportunities of timing the market at the 2015 Schwab IMPACT conference.  As reported by Financial Advisor, the two speakers generally agreed that “the stocks that are the most popular will do the worst, as Ibbotson said, or, as Arnott put it, “you just have to find the flows and do the opposite.” But Arnott argued for focusing on underlying valuation and… Read More

Low Risk, High Reward?

It’s one of the most widely accepted tenets of investing: More risk means more reward. But noted researcher Roger Ibbotson says that’s often not the case. Ibbotson tells Morningstar that, while the higher risk/higher reward concept seems to play out when comparing different asset classes, his research has found that it’s a different story within asset classes. “In every category we looked at — and we actually looked at six different categories here — and… Read More

Small, Illiquid, and Cheap: A Winning Combo

In a column for Canada’s Globe and Mail, Norman Rothery says that, while many investors focus on popular, frequently traded stocks, the real profits lie in smaller, illiquid shares.  “While the return potential of small value stocks is well known, the benefits of low liquidity may be less obvious,” Rothery writes. He examines a study recently published in the Financial Analysts Journal, which was performed by Roger Ibbotson and others. It looked at U.S. equity… Read More

Less-Liquid Stocks, Bigger Returns?

Yale professor, author, and investment manager Roger Ibbotson says that investors can score some strong gains by focusing on stocks that are less liquid. Ibbotson tells Morningstar that buying less liquid stocks involves “getting away from the exciting, hot-traded stocks that you might hear on the news all the time, and buying the other overlooked parts of the stock market, the less-popular parts of the stock market. … In fact, those are where you will get the… Read More

Ibbotson on the Overlooked “Liquidity Premium”

Yale Professor and money manager Roger Ibbotson, whose research into historical stock returns is among the most extensive available, says that investors can get a premium by investing in stocks or other assets that have lower levels of liquidity. Ibbotson tells Bloomberg that this “liquidity premium” is a “forgotten area” of stock analysis. [youtube=]