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New videos from
Juhani Linnainmaa and Jason Hsu
Professors Juhani Linnainmaa and Jason Hsu examine the common beliefs of financial advisors that lead to poor investor outcomes, and strategies to overcome these "investment sins."
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The Misguided Beliefs of Financial Advisors
Juhani Linnainmaa, PhD
An examination of the common belief that conflicts of interest contribute to the high cost of financial advice reveals most advisors invest personally just as they advise their clients, engaging in frequent trading, returns chasing, selecting expensive actively managed funds, and underdiversifying. Advisors’ net returns of −3% a year are similar to their clients’ net returns.
Poor investor outcomes are often caused by the industry’s tendency to sell recent past performance. Trend chasing ultimately leads to a return gap for investors. One way advisors and their clients can address this is to ignore the short-term noise and be a contrarian.
Explore how investors are commonly fooled by current performance metrics. Learn how to correct for these common mistakes and allocate to managers that have the highest probability of repeating good performance and avoid redeeming from high-quality managers that have experienced some bad luck.
Is Your Alpha Big Enough to Cover Its Taxes?
An overview of our research 25 years after Arnott and Jeffrey (1993)—who found that traditional equity managers’ alpha was not big enough to cover their taxes in most instances—finds that the more efficient forms of investment management and investment vehicles introduced over the last quarter-century now make earning alpha in excess of taxes more plausible for investors.
Where Do Capital Market Assumptions Come From?
Chris Brightman, CFA
An explanation of how to derive forward-looking return and risk assumptions for asset classes, and how to use these assumptions to set expectations and build portfolios that deliver better outcomes.
Smart Beta Selection—Pick the Right One!
Feifei Li, PhD, FRM
Shifting your smart beta strategy selection focus to craftsmanship and cost. Learn what questions to ask and how to make better-informed decisions when investing in smart beta.
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