Published on Proactive Advisor Magazine May 6, 2020

Applying behavioral finance concepts to fund manager behaviors has proven helpful in selecting top-performing equity funds.

Published on Proactive Advisor Magazine May 6, 2020

Is it time to move away from the efficient market hypothesis to a more realistic representation of markets? Viewing stakeholders as emotional decision-makers, rather than rational computational entities, will help in navigating a changing financial environment.

Emotional behavior and biases run throughout financial markets. This is the diagnosis of behavioral finance. But it is not enough to know that investors make biased decisions. What do we do about it? How do we move beyond diagnosis, to prescription?

As published on Advisor Perspectives June 22, 2020

Is the market environment turning favorable for active equity managers? It seems a strange question to ask in the midst of a pandemic and heightened market volatility, but history tells us that it is during just such turbulent times that active managers excel. There is accumulating evidence that market conditions are growing more attractive for showcasing stock-picking skills.

Behavioral finance is sweeping through the financial services industry. Financial advisors are the furthest along, introducing these concepts into their practices, including needs-based planning, outsourcing non-core activities such as investment management, and creating a reassuring behavioral experience for clients.

We are witnessing a dramatic flow of money out of active equity mutual funds and a similarly sized flow into index funds. A large portion of these outflows are from so-called closet indexers, funds that claim to be active equity managers but, upon closer inspection, closely track an index while charging active fees. Investors have wised up to this and are heading for the exits, moving into much lower-fee passive funds that provide the same underlying equity return.