Key Points The internal rate of return (IRR) is a unreliable method for calculating performance due to potential manipulation and fabrication by fund managers. Predictability is a major concern in private equity (PE) performance, with evidence suggesting a lack of persistence and uniqueness in investment methodologies. Studies indicate low persistence in PE performance, challenging the notion of talent and skill … Read More

“` Key Points – “Financial Markets and Institutions: A European Perspective” (fourth edition), 2020, by Jakob de Haan, Dirk Schoenmaker, and Peter Wierts, provides advanced undergraduates and graduate students with an updated overview of European financial markets and institutions, including recent data and regulatory developments. – The book offers a specific European perspective on financial markets and institutions, shedding light … Read More

Mutual fund companies often assess their business performance based on the growth of their assets under management (AUM) and their fund flows. However, market share and change in market share are considered more effective measures of performance, and a new framework has been introduced to analyze market share dynamics among fund families. This framework provides insights into the strengths and … Read More

— ## Key Points – Modern Finance has attempted to quantify radical uncertainty using simplified models, leading to significant repercussions for the financial sector. – There are various approaches to dealing with radical uncertainty, including the precautionary principle and embracing trial and error amid uncertainty. – Cultivating a culture of surprise involves preparing for both positive and negative surprises in … Read More

Tesla will be included in the S&P 500 Index on 21 December 2020. Exclusion of Tesla from the S&P 500 had caused a 16% drop in its shares. Tesla’s inclusion at the start of 2020 would have resulted in greater returns but also higher volatility for the S&P 500. With Tesla included, the S&P 500’s Sharpe ratio would have risen … Read More

Seeking Virtue in Finance: Contributing to Society in a Conflicted Industry. 2020. J.C. de Swaan. Cambridge University Press. J.C. de Swaan, a Princeton professor and investment practitioner, has produced a valuable guide for those navigating the ethical challenges in the finance industry. The book, “Seeking Virtue in Finance,” presents compelling narratives about practitioners who have lived exemplary professional lives and … Read More

Great storytelling can have a powerful impact in finance, leading to either success or failure. The narrative of intangibles rendering the value factor obsolete may not be entirely accurate. The rise of intangibles as a percentage of market capitalization is a symptom, not the cause, of the value factor’s poor performance. The performance of the value factor is influenced by … Read More