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Investing

  • Why Do Our Peers’ Financial Decisions Affect Our Own?

    The choices we make—the cars we drive, the neighborhoods we live in, the gyms we join—are influenced by our social networks, the people we surround ourselves with. Our financial choices are no exception. While thousands of studies have examined peer effects, a new study co-authored by Florian Ederer, assistant professor of economics, is the first to clearly identify the two channels of social influence—social learning and social utility—that explain why our peers’ financial decisions affect our own.
    Illustration of several lightbulbs illuminating with dollar signs indicating idea as well
  • Is Smart Beta Really So Smart?

    Smart beta is the hot thing in investing strategies, marketed as a new way to diversify and reduce risk. But Eugene Podkaminer ’01 argues that common smart beta strategies recycle long-established methods and likely aren’t the most efficient way to achieve those goals.
  • Big Box Retailers Squeeze Smaller Suppliers by Borrowing from Them

    Large, investment-grade companies such as Walmart and Home Depot that can easily borrow money in the capital markets often receive financing from their much smaller, credit-constrained suppliers. A new study examines the effects of this pattern of financing and finds that it squeezes small suppliers, creating a cash shortfall and causing them to cut back on capital investments.
  • How Do You Invest in a Changing China?

    Lei Zhang ’02 has been one of the most successful investors in China during a time of unprecedented change. In a conversation with Yale’s Stephen Roach, he talked about rapid shifts in China’s business and culture, the birth of a consumer class, the Chinese innovation model, and the outmoded views of the country that remain prevalent in the West.
    Lei Zhang and Stephen Roach
  • What’s the Right Algorithm for Quantitative Investing?

    Computer-based trading dominates markets, with a majority of trading activity in major markets happening without any human intervention. Robert Litterman, a pioneer of the quantitative investing approach, spoke with Yale Insights about how ruthless competition keeps the field changing and why he believes human judgment remains an essential component of any strategy.
    What’s the Right Algorithm for Quantitative Investing?
  • Can We Fix the Public Pensions Crisis?

    Millions of government workers in the U.S. are relying on pension plans for retirement, and yet these plans are underfunded by at least $1 trillion. Asset manager Ranji Nagaswami ’86 argues that addressing this challenge is about more than assets and liabilities—we have to look at how funds are run and, critically, how they think about risk.

  • What Is Factor-Based Investing?

    Asset classes have long been the building blocks of investment portfolios, but when apparently uncorrelated investments moved in sync during the financial crisis, it raised fundamental questions about whether diversified portfolios actually were diversified. Eugene Podkaminer ’01, vice president of capital markets research at Callan Associates, discusses whether there is a better way to understand the deep forces driving these results.
  • Can impact investing have an impact?

    Impact investing, a growing niche in finance, seeks to marry strong financial returns with positive social impacts. That can mean investing in companies whose products improve the environment, or it can mean helping a startup find ways to positively contribute to the neighborhood where it’s based. Nancy Pfund ’82, founder and managing partner of DBL Investors, talks about the growth of the sector.
  • Does focusing on shareholder value hurt shareholder value?

    Shareholders own the corporation, so managers should maximize returns for shareholders, right? Corporate law expert Lynn Stout says that there are problems with this argument, starting with the fact that legally shareholders don't own a corporation. On top of that, she says, prioritization of shareholder value harms returns in the long run.