Stocks May Be Expensive but Not Overvalued

Publications like Bloomberg, The Financial Times, and The Wall Street Journal[1] have recently reported that current stock markets and especially those in the United States are more overvalued than ever. In an interview with the Financial Post[2], David Rosenberg, chief economist and strategist at Gluskin Sheff + Associates Inc., added that U.S. stocks are “supremely overvalued.” This suggests that a period of gloom might be closer than anticipated. There is, in fact, good reason for investors to be concerned. In terms of price earnings ratios[3], the S&P 500 Index has been trading at an … Read more

Are Hedge Funds Worth As Much As They Say They Are?

In 2001, hedge fund manager Cliff Asness co-wrote a famous paper, Do Hedge Funds Hedge?1 Sixteen years later, amid significant changes in the industry, it’s worth asking, Are hedge funds worth as much as they say they are? And what explains the expectation, as reported by Preqin,2 that outflows from hedge funds will continue in 2017 (I suspect either performance-related or cost-related issues, or both)?

Using the CSFB/Tremont Hedge Fund Index’s monthly returns from January 1994 to January 2014,3 I conducted a study similar to the one described in Asness’s paper. I tried to determine whether hedge … Read more