Bringing Empiricism to Stock Markets & Investing

 

 

We take for granted this modern era of quantitative investing. But it wasn’t always this way; for most of the modern era of financial history, there simply was not the data set available to intelligently think about

That was changed in large part due to the work of Roger G. Ibbotson, Professor Emeritus of Finance at Yale School of Management, our guest on this week’s Masters in Business interview. Ibbotson has been instrumental in turning investing into a more empirical practice. He served as executive director of the (now famous) Center for Research in Security Prices (CRSP). The data he assembled in Stocks, Bonds, Bills, and Inflation led to a such great demand for the application of this statistics that he launched Ibbotson Associates (the firm was purchased by Morningstar in 2005). As a Ph.D. student at the University of Chicago, he ran the endowment’s bond portfolio using the data he assembled.

Ibbotson is Chairman and CIO of Zebra Capital Management, an equity investment and hedge fund manager; he sits on the Board of Directors of Dimensional Fund Advisors. He has written numerous books, including the annual Stocks, Bonds, Bills, and Inflation, as well as Investment Markets: Gaining the Performance Advantage and Global Investing: The Professional’s Guide to the World Capital Markets

His most recent research paper is Popularity: A Bridge between Classical and Behavioral Finance.  He described how things that become popular are less appealing to him as an investor while unpopular assets are more attractive. Popularity could be a function of brand, valuation, liquidity, etc.

His favorite books are here; a transcript of our conversation is posted here.

You can stream/download the full conversation, including the podcast extras on iTunesBloombergOvercast, and Stitcher. Our earlier podcasts can all be found at iTunesStitcherOvercast, and Bloomberg.

Next week, we speak with Joshua B. Miller who proved that the “Hot Hand” in basketball is real after all.