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Financial Happenings Blog
Thursday, June 11 2009

Professors Fama & French published academic research in 1992 which forms the core of this firm's philosophy towards investing. The details of their paper can be found on our website - The Three Factor Model.


Earlier this year, in conjunction with Dimensional Fund Advisors, the professors started an online forum through which they could discuss a range of important and interesting investment topics.


This month they have included a series of items looking at the problems with an active investment approach.  The first two are video pieces for those who prefer to take in information visually.


More sellers than buyers? - Ken French discusses why share prices fall and links it to expectations about future cash flows and the expected return on an investment including changes in perceived risk with investing in a particular investment or the market as a whole.


Is this a good time for active investing? - Ken French is interviewed about whether now is a good time to take an active management approach.  His response is that it comes down to a mathematical exercise regarding fees.  At every instant in time the average active investor will underperform an index based approach because they are paying more fees to do so.


Why active investing is a negative sum gain - In a written piece Eugene Fama & Ken French look at the arithmetic of active management as set out by William Sharpe in 1991 setting out the same argument as raised by Ken French in the previous video.


All are well worth a look.  If you would like more information about what we see as the aacademic research that underpins a sound approach to investing please take a look at our Research Based Approach pages on our site.



Scott Keefer

Posted by: Scott Keefer AT 06:06 pm   |  Permalink   |  Email
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