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Economics


Artificial Intelligence and Defined Contribution Plans
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How will artificial intelligence (AI) affect the world of retirement accounts, specifically defined contribution (DC) plans? Sahil Sethi, CFA, anticipates several stages of development.

Investing in Small-Cap Biotech through Hedge Funds
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After analyzing small-cap biotech data from 2007 on, Akash Goyal has found that higher hedge fund ownership is positively correlated with forward returns and that stocks with higher short interest are correlated with negative forward returns.

Top Five Articles from September: The Value Factor, Non-Retirement, Finance and Civilization
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A defense of modern portfolio theory (MPT) by Nathan Erickson, CFA, CAIA, and Richard Stott; Nicolas Rabener's analysis of the value of factor investing; and an examination of the non-retirement phenomenon by Barbara Stewart, CFA, were among the leading posts from last month.

Book Review: The Power of a Single Number
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Gross domestic product has become the comparative benchmark for the wealth and growth rates of nations. The author provides a concise history of GDP, which offers fertile ground for the consideration of future changes to its use and to the use of other inputs in the valuation of stocks and stock markets.

Raising Modern Portfolio Theory (MPT) from the Dead
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C. Thomas Howard and Jason Voss, CFA, have called for the demise of modern portfolio theory (MPT) and the capital asset pricing model (CAPM). They say “financial markets should be viewed and analyzed using a behavioral lens.” Nathan Erickson, CFA, CAIA, and Richard Stott have a different opinion.

Artificial Intelligence: Fusing Technology and Human Judgment?
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Can artificial intelligence (AI) arrange a perfect marriage of technology and human judgment?

Book Review: Economics for Independent Thinkers
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Economics for Independent Thinkers is useful to practitioners who make economic forecasts. Investment strategist Daniel Nevins, CFA, recounts becoming a skeptic about the application of quantitative methods to economics and about standard prediction methods, such as the lagging nature of consumer confidence surveys. He especially disdains economists who strive to make reality fit their models.

Parallel Worlds and Brexit: Guiseppe Ballocchi, CFA
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"Parallel Worlds," one of the four potential scenarios envisioned in the "Future State of the Investment Profession" study, anticipates the rise of populism, a reduction in the size of the middle class, and a decrease in social mobility. For a better understanding of how this scenario could affect the future of the investment management industry, Robert Stammers, CFA, spoke with Giuseppe Ballocchi, CFA.

Planning for a Non-Retirement
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Much of financial planning focuses on retirement. But what if your client isn’t planning to retire? Barbara Stewart, CFA, explores the question.

Book Review: Empire of the Fund
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William Birdthistle provides a witty description of mutual fund design and categorizes its imperfections entertainingly, offering more palatable alternatives. This slender volume is a welcome addition to the library of the professional and retail investor alike.