Recent performance has favored passive investing. But a look at the big picture shows how performance moves in cycles, and reveals why active may soon pull ahead. To read the full article in Hartford Funds, click: The Question is Active or Passive Investing. The Answer is Yes.
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Considerations in Applying a Size Premium (Part III of III) In this third and final article, as displayed in Exhibits 1 through 4 in Part 1 of this three-part article, the size effect has been observed even when looking at recent periods starting in 1981 and 1990. If one holds that you should not apply the SP in the MCAPM and that beta should be the only measure of risk, one is supporting using the pure or textbook CAPM to estimate expected returns. But that cannot be correct as the literature clearly demonstrates. Though the pure CAPM is a good…
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When Estimating the Cost of Capital (Part I of III) In this paper, published in three parts with NACVA’s QuickRead, Roger Grabowski reviews the size effect, potential reasons why one observes the size effect, and correct common misconceptions and address criticisms of the Size Premia (SP). Throughout this paper, the author shows that using a pure market factor as the sole risk factor in estimating the expected return provide an incomplete estimate. For the last four decades, research has shown that adjustments to the CAPM are required. Here, Roger Grabowski addresses some of the criticism to the theoretical basis of…
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The first three quarters of 2017 were active for U.S. markets. Major indices were characterized by low volatility and upward momentum against a backdrop of tightening monetary policy and strong economic indicators. Private equity saw steady deal flow despite challenging market conditions, and record levels of venture capital deployment were seen amidst declining deal volume as capital continued to gravitate to the unicorns. With one quarter left, we take a look at market activity during the first three quarters of 2017. To read the full article in Mercer Capital’s Financial Reporting Blog, click: Market Trends: 3Q17 Update. This article is…
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Questions for a Retirement-Preparedness Gut Check Pre-retirees should examine whether they direct too much money to goals other than retirement savings, take advantage of employer matching, and structure savings so enough pretax income is set aside. Jonathan Clements states that other important considerations include how retirees will spend time once they stop working and whether there is a danger of outliving savings. To read the full article in HumbleDollar, click: Retirement: 10 Questions to Ask.
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The stock market rallied in the first five months of the year, with the Dow Jones and S&P 500 reaching record highs and continuing to climb. Megan Richards, financial analyst with Mercer Capital, explains though, that IPOs remain scarce compared to prior years. To read the full article in Mercer Capital’s Financial Reporting Blog, click: IPO Supply and Demand. This article is republished from Mercer Capital’s Financial Reporting Blog. It is reprinted with permission. To subscribe to the blog, visit: http://mercercapital.com/category/financialreportingblog/.
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When it comes to money, “enough” is the hardest word to define in the English language. The challenge of defining “enough” extends to corporate managers deciding what cash balance is appropriate. Travis Harms, lead of Mercer Capital’s Financial Reporting Valuation Group, takes us through the data offering helpful tips. To read the full article in Mercer Capital’s Financial Reporting Blog, click: Is Cash Always King? This article is republished from Mercer Capital’s Financial Reporting Blog. It is reprinted with permission. To subscribe to the blog, visit: http://mercercapital.com/category/financialreportingblog/.
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Federal Class-Action Litigation in Securities Disputes Rises Class-action securities lawsuits filed in federal court last year numbered 270, the most in 20 years, according to a report from the Stanford Law School Securities Class Action Clearinghouse and Cornerstone Research. The 80 filings related to mergers and acquisitions were the biggest factor in the increase. Meaghan Kilroy explains. To read the full article in Pensions&Investments, click: Federal Securities Class-Action Suits Jump to 20-Year High in 2016.
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The magnitude of the equity risk premium, or required return in excess of the risk-free rate, is a perennial question for valuation specialists. Travis Harms, Mercer Capital’s Financial Reporting Valuation Group lead, explains that the aggregate equity premium is typically broken into two pieces: 1) a market risk premium, and 2) a size premium. To read the full article in Mercer Capital’s Financial Reporting Blog, click: A Market Participant Perspective on the Size Premium. This article is republished from Mercer Capital’s Financial Reporting Blog. It is reprinted with permission. To subscribe to the blog, visit: http://mercercapital.com/category/financialreportingblog/.
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Brexit Market Losses Reached a Record $2T Global markets lost more than $2 trillion in paper wealth following news that the UK had voted to leave the EU. That made the largest single-day drop in history, surpassing a $1.9 trillion sell-off during the financial crisis in September 2008. Edward Krudy describes what happened. To read the full article in Reuters, click: Post-Brexit Global Equity Loss of Over $2 Trillion Worst Ever: S&P.
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Earnings Season Likely to Confirm U.S. Profit Recession Major U.S. companies stand a good chance of reporting fourth-quarter results that show earnings have fallen two quarters in a row, marking a recession. Forecasts call for a 4.2% decline in earnings and a 3.2% decrease in revenue for companies in the Standard & Poor’s 500 index. Bernard Condon, AP business writer, discusses the issues and what to expect. To read the full article in ABC News, click: It’s Not Just About China: Company Profits to Drop—Again.
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At Issue: Standard & Poor’s Ratings of Mortgage Bonds Before the Financial Crisis Jean Eaglesham, Jeannette Neumann, and Evan Perez report at the Wall Street Journal that S&P is under fire. Here’s more: