Thinking about how best to design a more robust investment strategy to deal with the prospect of increased volatility becoming the new normal, the best model that comes to mind is from a sporting context: football (or soccer, to most Americans).
In the face of the volatility that largely defined the markets in 2014, it is our goal here at the Enterprising Investor to provide you with practical examinations of current issues in finance and investing. Below is a selection of analyses, advice, and, if nothing else, some simply interesting opinions that address the myriad changes markets have experienced this year.
Investors who are primarily concerned about avoiding permanent losses would do well to analyze mounting fixed income leverage and remember the true meaning of risk.
Up until last week’s wild ride for stocks, volatility had been largely absent from the market, but the cumulative effect of ongoing geopolitical chaos, spreading Ebola anxiety, and uninspiring economic data, combined with the rumored unwinding of some leveraged positions by hedge funds, at least temporarily jolted global equity markets. Complacency was quickly replaced with panic and we got a reminder of what happens when everyone heads for the exit at the same time.
This is the first part of a two-part interview with Nobel Laureate Myron Scholes. In this installment, Scholes shared his perspectives on the Black-Scholes option pricing model, from the motivation and intuition of the original formula to the myriad of extensions.
Alarm bells have been ringing over the summer about remarkably low levels of volatility — a key input in many common investment models — across global markets.
Client emotions can swing from fear to greed (and from hysteria to elation). Ron Florance, CFA, former deputy chief investment officer at Wells Fargo, outlines seven key principles that can help you convince clients to stay the course.
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