Small cap: is the pain worth the gain?

Over the last 60 years, the simple average annual return of the Fama/French benchmark small-cap portfolio* was 16.3%. For the same period, the large-cap portfolio* was only 12.76%. Do you think small cap beat large cap by a wide margin? Why isn't small cap more popular?>>>

Volatility: a drag on return

If volatility does not measure risk, what is it?. >>>

A costly investment mistake: confusing volatility with risk

Confusing volatility and risk could cost you a bundle. Let's take a look at returns on an investment of $1000 over 50 years from 1958-2007 in five asset classes.

• Small cap value: $3,750,000
• Small cap growth: $81,200
• Large cap value: $854,000
• Large cap growth: $130,000
• CD: $13,800

Investor sentiment and stock market return

Investor sentiment is at its lowest since 1990 and second lowest since the American Association of Individual Investors (AAII) sentiment indicator began in 1987. On 2/7/08, the 8-week moving average bull/bear spread reached the low of -25% and has since hovered below -20%. What does it mean for investors that the bull/bear spread stands at -25%? And what is the bull/bear spread?. >>>

Best China Investment: Taiwan

Chinese stocks are hot, Taiwanese stocks are not. That's about to change. >>>

What do Fed rate cuts mean for your stock portfolio?

Last month, the Fed took a drastic step to cut rate twice by a total of 125 basis points. And with a drop of 225 basis points since last fall, what does this say about likely stock returns? Let’s look at the historical data. >>>

Small is beautiful in a recession

We’re already in a recession. Or, that’s what the pundits say. They may well be right. But what will you do about it? Will you follow common wisdom and seek relative safety of large cap stocks? After all, large cap stocks are safer— right? >>>

After deep sell-offs, follow sharp rallies?

In the three month period between Oct 19th, 2007 and Jan 18th, 2008, the S&P 500 index fell 14.1% and the Russell 2000 Value Index fell 19.5%. To understand what is likely to happen next, I studied the top 10 worst three-month-sell-offs since 1950. These sell-offs ranged between -13% to -30%. I found that in 8 out of the 10 occasions, the S&P 500 index rebounded by more than 20% in one year. Small Cap Value stocks did even better. >>>

Recession and stock market performance

... So what can we expect the stock market to do during a recession-and after it? I may not have a crystal ball to see the future, but I have made an in-depth study of all nine recessions since 1950. Even if history won’t repeat itself, looking at the past half-century should give us some perspective. >>>

Small cap value underperforming: a historical perspective

By the end of 2006, Small Cap Value stocks had completed a historical 7 year run of outperformance relative to Large Cap Growth stocks. According to Prof Kenneth French’s data library, during this 7 years, Large Cap Growth returned a total of -10.35% while Small Cap Value returned a total of 266%! 2007 however saw a drastic reversal. >>>

Recession and stocks: shall we be afraid?

What a difference one month made! When I left for vacation one month ago, the Sub-Prime Crisis appeared to be a spent force; when I returned, all talks are about recession. I am sure you have many questions (if you are like me): Will there be a recession? Will the stock market and the US economy survive a recession? What shall we do now? >>>

Not without risk: factors driving stock returns

In this article, I will attempt to explain the three primary factors driving stock returns and how our strategy MDVFS is designed to exploit these factors. >>>

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