External Research

The external research available here represents the major academic work that underlies what we call “the science of capital markets.” This works forms the foundation for our asset class based approach to investment and portfolio management.

In addition, we have included work that represents the core thinking that surrounds the “Behavioral Finance” approach to understanding investor behavior in financial markets. This work outlines why investor behaviors are less “rational” than finance theory once predicted and how mistakes can be avoided.

The Value Premium and the CAPM, Eugene F. Fama and Kenneth R. French

This is the original research that showed that the dominant stock pricing theory (CAPM) was incorrect.  The research has been accepted because the authors are leading academics who were proponents of CAPM.  This paper shows that small stocks and "value" stocks have higher returns than can be explained by the original CAPM theory.

The Cross Section of Expected Stock Returns, Eugene F. Fama and Kenneth R. French

This is a follow up article - published several years later - that shows that small stocks and "value" stocks have "abnormally high" returns.  This article has cast doubt on the idea that investors receive proportionally higher returns for taking on higher risk.  Small stocks and value stocks have generated higher returns than investors should expect based on the level of risk of these asset classes.