Practical analysis for investment professionals

Primer


Eight Key Factors in Effective Portfolio Management for Turbulent Times

How can investors better manage their portfolios in these turbulent times? This central question framed an engaging session led by Pranay Gupta, CFA, last month at the second annual India Investment Conference in Mumbai.

Just Released: Rethinking the Equity Risk Premium

Ten years ago investment community luminaries met to discuss the equity risk premium. Now in a new Research Foundation of CFA Institute monograph state of the art thinking about the equity risk premium is presented for the benefit of investors worldwide.

Write or Wrong: A Flat Market Doesn’t Mean Flat Returns

The world is flat, or so people thought, until enterprising Greek philosophers challenged the notion in the 6th century BC. More than 2,000 years later, Ferdinand Magellan made a practical demonstration of that fact when he circumnavigated the globe. Although stocks in 2011 sailed through periods of sunshine, wind, and rain, many equities markets ended up flat just the same. Nonetheless, some investors proved that it is possible to make money in this market — and they did so writing covered calls.

Losing Money to Preserve Capitalism: Can We Afford to Continue Bailouts? (Part 2)

Modern banking system bailouts fly in the face of the ancient capitalist philosophy of losses signaling market risks. In addition, financial bailouts tend to escalate in size and damaging effects with time.

The Hildebrand Case: Ethics and the Power of Perception

The recent scandal that led Swiss National Bank chairman Philipp Hildebrand to resign highlights the difference between what is legal and what is ethical. The law tells us what we “can and cannot do,” whereas ethics tells us what we “should and should not do.”

Losing Money to Preserve Capitalism: Can We Afford to Continue Bailouts? (Part 1)

A major and ancient tenet of capitalism is the importance of losses to preserving the efficiency of markets. Yet modern banking system bailouts fly in the face of this perennial philosophy.

Trust is in the Details: Why Advisers Need to Close the Knowledge Gap on Alternative Strategies

A recent survey suggests that some investment advisers may be recommending alternative investment strategies that neither they nor their clients fully understand. In order to regain the confidence and trust of clients and the public at large, investment professionals must commit to doing a better job of understanding — and communicating — the features, characteristics, and risks of these complex strategies.

The DCF Model: Question Your Assumptions

The recent public debuts of companies that have shown great revenue growth but little to no earnings, such as Groupon and LinkedIn, were reminiscent of the dot-com bubble of the late 1990s, and there is a natural temptation to get caught up in the hype. For this reason, it is as important as ever for analysts to rely on the fundamental principles of investing and valuation. And the discounted cash flow (DCF) model is a great place to start.

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 ›

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?



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