In the summer of 2000, the Art Institute of Chicago fell under the spell of a young hedge fund manager named Conrad Seghers. The allure? Seghers claimed that his funds, called Integral, offered “the highest Sharpe ratios in the industry.” The Sharpe ratio is supposed to measure an investment's risk …
An obscure story worth understanding
A little while back, The Wall Street Journal ran an article with a puzzling title: “How China Pressured MSCI to Add Its Market to Major Benchmark.” Like a lot of market news, this arcane-sounding story came and went without much notice. But it is worth pausing to understand what it was all about, …
How to make financial decisions
Suppose you wanted to guess the winner of this Sunday's Super Bowl. Which of these methods do you think would work best? (a) Flip a coin (b) Make an educated guess (c) Gather data and conduct an informed analysis In a classic study, researchers Paul Slovic and Bernard Corrigan attempted …
Alphabeticity bias
In the world of personal finance, researchers have long understood that behavioral biases negatively impact investors. Examples include recency bias, hindsight bias, confirmation bias, and many others. These are all well documented. But recently, a group of researchers uncovered yet another investor …
May 1, 1975
In the history of the investment industry, May 1, 1975 is a date that ought to be enshrined. On that day, the industry took not one, but two, remarkable steps forward. The first change was an action by the SEC to deregulate stock brokers. For the first time in more than a hundred years, brokers …