计量经济分析 = Econometric analysis

Investor Psychology and Security Market Under- and Overreactions

Investors face numerous challenges when seeking to estimate the prospective performance of a longonly investment in commodity futures. For instance, historically, the average annualized excess retu...

The Strategic and Tactical Value of Commodity Futures

International Momentum Strategies

Neural networks are used in business organizations for providing intelligent decision support. The ABI/Inform bibliographic database has over 1 000 publications on business-related research in neur...

A bibliometric analysis

(1985). The Business Cycle and Security Selection. Financial Analysts Journal: Vol. 41, No. 2, pp. 26-32.

The Business Cycle and Security Selection

Much has been written recently, particularly after 2000–2002 left pensions in tatters, about the challenge of meeting pension obligations. The challenge discussed here is interesting and multifaceted—embracing issues of demographics, reasonable expectations, business ethics, stakeholder interests, the social compact, and intergenerational equity. The first step is to acknowledge the reality that assuming investments will earn a risk premium without acknowledging the risk that they will not deliver a premium disguises the real size of pension liabilities.

The Pension Problem: On Demographic Time Bombs and Odious Debt

The FAJ has played an important role in publishing some of the best thinking in the industry, positing new theories, and challenging established wisdom. “Reflections” pieces in this 60th anniversary year continue the tradition. Of several current accepted concepts that have fallen into question as a result of empirical observation, two discussed here are the capital asset pricing model and the capitalization-weighted market-clearing portfolio.

Whither Finance Theory

Thomas Piketty’s Capital in the Twenty-First Century rocketed to the top of the best-seller lists the moment it was published in 2013, and remained there for months. While this feat is quite remarkable for a weighty tome on economics, it’s no mystery why Piketty’s magnum opus created such a sensation; it is clearly articulated, accessible to the non-economist, has a sound neo-Keynesian foundation, and contains a trove of historical insights. We believe Piketty’s core message is provably flawed on several levels, as a result of fundamental and avoidable errors in his basic assumptions. He begins with the sensible presumption that the return on invested capital, r, exceeds macroeconomic growth, g, as must be true in any healthy economy. But from this near-tautology, he moves on to presume that wealthy families will grow ever richer over future generations, leading to a society dominated by unearned, hereditary wealth. Alas, this logic holds true only if the wealthy never dissipate their wealth through spending, charitable giving, taxation, and splitting bequests among multiple heirs.

The Rich Get Poorer: The Myth of Dynastic Wealth

In historical testing, valuation-indifferent weighting as applied to U.S. and global equities has produced statistically significant and economically large outperformance when compared with traditional capitalization-weighted benchmarks. In this paper, we apply the method to U.S. investment-grade corporate bonds, U.S. high-yield bonds, and hard-currency emerging market bonds. We find that fixed-income portfolios constructed using valuation-indifferent weighting outperform the corresponding cap-weighted benchmarks. We also find that the outperformance is higher for markets in which we might typically expect more inefficiencies and greater volatilities. Both findings are consistent with the empirical evidence found in the equity applications of valuation-indifferent weighting, as well as the proposed noise-in-price theoretical rationale for these results.

Robert D. Arnott

Papers

The Business Cycle and Security Selection

The Pension Problem: On Demographic Time Bombs and Odious Debt

Whither Finance Theory

The Rich Get Poorer: The Myth of Dynastic Wealth

Valuation-Indifferent Weighting for Bonds