Practical analysis for investment professionals
Top 5 Articles from December

Last month's most popular posts from the blog include articles on the potential FX mortgage crisis in Europe, competitive currency devaluation, and the sustainability of China's economic growth.

Leadership Lesson for the Eurozone: The Rule of Small Groups

Physical limitations in humans seem to limit our ability to make effective group decisions when the number of the group exceeds seven members. This has important implications for boards of directors, investment committees, and transnational economic organizations, such as the eurozone.

Take 15: Global Investing in the New World Order

With much of the developed world in a sovereign debt crisis, what implications will this have on your portfolio risk profile, benchmark, and asset allocation? Having spent his entire career in emerging market and non-U.S. investments, Jeffrey P. Davis, CFA, describes what he believes is a fundamental shift in the global market portfolio.

Book Review: Portfolio Design

Richard Marston certainly has the credentials to author a book on portfolio design. Currently the academic director of the Private Wealth Management Program at the Wharton School of University of Pennsylvania, he has taught in five countries, is the recipient of both a Rhodes Scholarship and a Fulbright Fellowship, and—perhaps most relevantly—has taught asset allocation to more than 5,000 financial advisers as a faculty member in the Certified Investment Management Analyst program. Marston has accomplished what many investment academics find difficult—namely, produce a book that is truly practical and “hands-on” for both financial advisers and investors. Portfolio Design: A Modern Approach to Asset Allocation deftly combines rigorous academic research with everyday investment experience to provide a guidebook to the complexities underlying portfolio design and asset allocation.

Take 15: Valuation: Lessons Learned from the Crisis

Steven J. Sherman discusses the role of the International Valuation Standards Council and how it differs from that of the accounting standard setters. Mr. Sherman also provides his thoughts on the large number of restatements by public companies in recent years due to valuation issues.

The Consequences of Insider Trading: A Cautionary Tale

Who says that one bad apple doesn’t spoil the whole bunch? Just ask FrontPoint Partners who saw its assets under management decline with breathtaking speed—dropping by $6 billion in eight months—after one of the firm’s portfolio managers was caught… READ MORE ›

Book Review: Corporate Governance Failures

In August 2007, the head of AIG’s financial products division stated, “It is hard for us, without being flippant, to even see a scenario within any kind of realm of reason that would see us losing one dollar” in any credit default swap (CDS) transactions. Five months later, AIG disclosed that it had lost not $1.00 but $5 billion on its CDS exposure. This turn of events is just one example of sophisticated financial institutions’ hugely misjudging the risk of “financial weapons of mass destruction.” The reasons for their systematic failure deserve thoughtful and rigorous study.

Take 15: Superior Risk Management through Value Investing

Charles K. Bobrinskoy describes how Ariel Investments puts Buffett value investing principles to work.

Lie Detection: How Can Financial Analysts Improve Their Ability to Discern the Truth?

Effective financial decision making relies on a proper assessment of the truthfulness of facts. Yet, most people, even professionals, are terrible at spotting lies. Why?

PIMCO Veteran Paul McCulley: A New Model for Understanding Geopolitical Crises

As a former portfolio manager, I know that practitioners often pay too much attention to the micro-level issues of individual securities and not enough attention to the broader macro-level context. Investors often reach for a microscope when they should… READ MORE ›



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