Individuals differ significantly in their willingness to take risks. Such differences may stem, at least in part, from individual biological (genetic) differences. We explore how risk-taking behavior varies with different versions of the dopamine receptor D4 gene (DRD4), which has been...

We identify an otherwise efficient market in which racial stereotypes affect market outcomes. In this market, there are well-defined prices, well-defined outcomes, a finite time horizon, and readily available information. The market appears to efficiently process the available information, with...

Understanding the origins of wealth inequality is critical in the debate over what, if anything, to do about it. In this note, we propose a simple model which is still rich enough to reproduce observed patterns of wealth inequality. We call it the Concentrated Asset Betting (CAB) model. A key...

With 30% of the world's investment grade sovereign bonds trading at sub-zero yields, there is a growing acceptance that negative interest rates are the 'new normal.' Even very low probabilities of sustained negative interest rates in the future leads to incredibly high Expected Values for...

This note describes the background of Factor investing in its Smart Beta form, and discusses the reasons Factor investing has become a popular investing style. We also discuss a number of reasons for skepticism regarding forward-looking expected returns

March 2020 packed 2 ½ years of normal U.S. stock market volatility into one month, making it the most volatile month on record. Daily variability clocked in at 6%, six times higher than the average over the past 90 years. How should an investor respond to such volatility? In this article we...

These days it's become convention (reinforced by the media's treatment of wealth) to assess our net worth by tallying up the market value of our financial assets, even though it's more natural and useful to think of our wealth as a stream of dollars over time given the nature of our income and...

In understanding how leveraged ETFs perform, we'll uncover an important lesson relevant to all investing: how your choice of investment size can be more important than your choice of investment. To summarize, highly leveraged long and short ETFs provide a perfect illustration of how...

When it comes to trading time for money (or vice versa), people tend to be impatient and myopic. Often dramatically so. For illustration, half of people would rather collect $15 now than $30 in three months. This willingness to forego 50% of the reward to skip a 3-month wait corresponds to an...

The looming Savings Crisis is usually attributed to people either not saving enough or making poor investment choices, but we believe there's another culprit. Many investors could benefit from a 'free lunch' of pooling their longevity risk with others, but due to market inefficiencies, they do...