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How much passive investing is too much?
Warnings that index funds have broken the stock market all imply a threshold: a share of the market at which price discovery fails. Nobody making the argument names it. Owen Lamont, writing in the Financial Analysts Journal, argues that no such number exists short of complete passive ownership, and that what actually determines whether prices stay informative is who is left doing the trading. His case, the strongest peer-reviewed research against it, and what the performance
Robin Powell
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AI and stock returns: lessons from the railways
he most careful expert forecast of AI's economic effects covers GDP, productivity, employment and inequality. It does not cover share prices. Across 21 developed markets and 120 years of data, economic growth has shown no reliable positive relationship with what shareholders earn. What has correlated is growth in earnings per share, and four mechanisms separate the two. Here is what the evidence says about AI and stock returns, and what the railways and the dot-com boom alrea
TEBI
Aug 410 min read
Portfolio insurance: the crash protection that rarely pays out
Buying put options to insure a portfolio against a market crash feels like the prudent thing to do. But new research covering more than two centuries of market history finds that portfolio insurance loses money over time — and that it fails in exactly the slow, grinding bear markets that do investors the most harm. People insure almost everything they value. Homes, cars, phones, even pets: paying a modest premium to guard against a loss you would rather not face is one of the
Robin Powell
Jul 107 min read
US stock market dominance and the lesson from Britain
The United States now accounts for about 62 per cent of world stock market value. The last market this dominant was Britain in 1900, not America — and Britain's owners were rewarded through a century of decline, while Japan's were made to wait 34 years to break even. The difference was not size but the price paid at the peak. A look at what the long-run evidence says about US stock market dominance, and what it means for a globally diversified investor.
Robin Powell
Jun 138 min read
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