Articles on Investments
Jan 23, 2012
Q & A
In addressing a previous question ("Has the Equity Premium Puzzle Gone Away?"), you suggested that it requires 35 years or more to be reasonably confident of achieving a positive equity premium. Is the time frame similar for the size and value premiums?
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Jan 17, 2012
Q & A
Baker, Bradley and Wurgler (FAJ 2011) find that low-volatility stocks in the US outperform high-volatility stocks and attribute this apparent anomaly to investor behavioral biases as well as limits to arbitrage. What do you make of their argument?
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Jan 9, 2012
Q & A
We often hear the claim that some markets are less efficient than others—small company stocks, emerging markets, foreign exchange, and so on. Is there any evidence to support this assertion?
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Jun 27, 2011
Q & A
Data from Ken French's website shows that sorting stocks on E/P or CF/P data produces a bigger spread than BtM over the last 55 years. Wouldn't it make sense to use these other factors in addition to BtM to distinguish value from growth stocks?
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Jun 20, 2011
Q & A
What is the merit, if any, in using a country weighting scheme based on Gross Domestic Product (GDP) rather than market capitalization?
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Jun 13, 2011
Q & A
Are expected returns for "socially responsible" strategies lower compared to a conventional approach?
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May 31, 2011
Videos
Investors tend to overweight their equity portfolios with stocks from their home country market. Ken French says that, while home bias is still the norm, investors have significantly increased their allocation to foreign markets over the last 30 years. He explains that investors might overweight their home market for economic reasons, perhaps to hedge consumption risk or to offset tax disadvantages they suffer in some foreign markets. Home bias can also be driven by behavioral factors. For example, investors may overweight their home country because of their uncertainty (the unknown unknowns) about foreign markets, or because they are overconfident about picking stocks in their home market. Ken says the best approach is to start with a global market portfolio, then make adjustments based on personal preference.
(View the video)
(View the video)
May 23, 2011
Q & A
Is there a liquidity risk factor in stock returns that helps explain differences in average returns?
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May 9, 2011
Q & A
If US Treasury bonds are not risk-free due to inflation risk, does it make sense to diversify a portfolio of government bonds with obligations of other countries?
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Apr 25, 2011
Q & A
Do high-beta stocks have high expected returns? Do stocks with historically above-average betas exhibit above-average realized returns?
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Apr 11, 2011
Q & A
Can you address the pros and cons of short-term bond funds versus laddered bond strategies holding individual issues?
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Apr 4, 2011
Q & A
Financial theory suggests that a global value-weight market portfolio is the logical default position for an equity investor seeking the optimal allocation scheme across countries.
What are the implications for this approach if we take structural factors into account that encourage a home bias? Australia, for example, offers tax incentives applicable only to local investors, so their citizens earn higher returns than foreign investors do holding the same stocks. Brazil accomplishes the same thing by imposing additional taxes on foreign investors.
Would it make sense for foreigners to weight each country using a market cap adjusted to reflect only non-local holdings?
(Read the full entry)
What are the implications for this approach if we take structural factors into account that encourage a home bias? Australia, for example, offers tax incentives applicable only to local investors, so their citizens earn higher returns than foreign investors do holding the same stocks. Brazil accomplishes the same thing by imposing additional taxes on foreign investors.
Would it make sense for foreigners to weight each country using a market cap adjusted to reflect only non-local holdings?
Dec 8, 2010
Videos
Rising government spending around the world has many investors considering ways to hedge potential inflation, which may include holding TIPS or rolling over short-term Treasury securities. Ken French explains that investors can essentially eliminate inflation uncertainty by buying TIPS that mature when they want to consume. However, uncertainty about changes in real interest rates can make the choice harder for investors who will have to sell their TIPS before maturity.
(View the video)
(View the video)
Nov 1, 2010
Q & A
There seems to be some confusion about your opinion on the role of commodities in a portfolio, based on a conference presentation for financial advisors in 2004. Have your views changed since then?
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Oct 25, 2010
Links
This podcast features David Booth, MBA '71, and professor Eugene Fama of Chicago Booth. The discussion, moderated by Dean Edward Snyder, looks at Mr. Booth's co-founding of Dimensional Fund Advisors, which pioneered small cap investing, as well as the continuing contribution professor Fama and his research have made to the firm.
(Listen to the audio)
Oct 18, 2010
Q & A
If you are familiar with a recent survey of mutual fund performance by Fundquest (Jane Li, "When Active Management Shines vs. Passive," June 2010), your comments would be appreciated.
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Oct 11, 2010
Q & A
Some researchers argue that a market timing strategy based on buy/sell signals generated by a 50- or 200-day moving average offers a more appealing combination of risk and return than a buy-and-hold approach. What is your view?
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Oct 4, 2010
Videos
This video, recorded at the Chicago Booth 2010 Management Conference, features Eugene Fama and David Booth providing insights into what lies ahead for active and passive money management. (Watch the video)
Sep 27, 2010
Q & A
Many experts characterize the current environment as a "stock picker's market." Is there any evidence that stock selection is more successful under certain market conditions?
(Read the full entry)
Sep 20, 2010
Q & A
How can investors achieve exposure to commodities by investing in stocks?
(Read the full entry)
ABOUT FAMA AND FRENCH
Eugene F. Fama
The Robert R.
McCormick Distinguished
Service Professor of
Finance at the University
of Chicago Booth School
of Business
Kenneth R. French
The Roth Family Distinguished Professor of
Finance at the Tuck
School of Business at
Dartmouth College
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This article is distributed for educational purposes and should not be considered investment advice or an offer of any security for sale. This article contains the opinions of the author but not necessarily Dimensional Fund Advisors and does not represent a recommendation of any particular security, strategy or investment product. Dimensional Fund Advisors is an investment advisor registered with the Securities and Exchange Commission. Information contained herein has been obtained from sources believed to be reliable, but is not guaranteed. Past performance is not indicative of future results and no representation is made that the stated results will be replicated.
Dimensional Fund Advisors Ltd. is authorised and regulated in the United Kingdom by the Financial Services Authority (FRN: 150100), is registered in England and Wales under Company No. 02569601 and VAT No. 577327607. The registered office address of Dimensional Fund Advisors Ltd. is 7 Down Street, London, W1J 7AJ, United Kingdom. Dimensional Fund Advisors Ltd. is a subsidiary of Dimensional Fund Advisors.
Dimensional Fund Advisors Ltd. is authorised and regulated in the United Kingdom by the Financial Services Authority (FRN: 150100), is registered in England and Wales under Company No. 02569601 and VAT No. 577327607. The registered office address of Dimensional Fund Advisors Ltd. is 7 Down Street, London, W1J 7AJ, United Kingdom. Dimensional Fund Advisors Ltd. is a subsidiary of Dimensional Fund Advisors.