Brent Wheeler's Page

31 MARCH 2010 BY TPC Abnormal Returns

As stocks have become increasingly invulnerable over the last few weeks high beta assets have gone thru the roof. The discrepancy between small caps and large caps has been particularly noticeable. Since the February 8th bottom, large caps have rallied 12.5% while small caps have rallied 18%.

The divergence in performance has resulted in an unusual and potentially bearish scenario. The ratio of large cap to small cap performance has plummeted in recent wee… Continue

As ever Prof Aswath Damodaran makes great points here..... I especially like his point that if stocks always beat everything else the ERP for the long term would be zero. Indeed!!! Obvious yet people have built entire careers on this assertion.

Equity Risk Premiums and the Fear of Catastrophe

As many of you already know, I am a little fixated on the equity risk premium. More than any variable, it explains what happens in equity markets both in the short term and the long term. In fact, I have… Continue

This paper is of great significance - once you get the idea here you can see that without any need for empirical data or research into returns and so on, passive investment must beat what active investors as a group can do.... originally an insight of Bill Sharpe here is the Fama French explanation. It is worth persevering through.

Why Active Investing Is a Negative Sum Game
by Eugene F. Fama and Kenneth R. French

William F. Sharpe has a great article in the January/February 1991 issue of The… Continue

This is a clear enough statement and makes complete sense to me....

by EUGENE F. FAMA

There has been lots of response to my little essay on bailouts and stimulus plans. I will only comment on the negative ones that I think have merit and are overlooked in my original paper.

First, however, I want to restate my argument in simple terms.

1. Bailouts and stimulus plans must be financed.

2. If the financing takes the form of additional government debt, the added debt displaces other uses of the… Continue

Interesting lessons here - and how to be careful what you wish for.


Bankruptcy could be good for America
By Gideon Rachman
Published: January 12 2010 02:00 | Last updated: January 12 2010 02:00 (From the FT)

In Winnie-the-Pooh , there is a significant moment when the bear is asked whether he wants honey or condensed milk with his bread. He replies "both". You can get away with this sort of thing if you are a much loved character in children's literature. But it is more problematic when great… Continue