Sunday’s New York Times featured a lengthy article about Bill Gross, he of the draped necktie, and Pimco, the powerhouse bond manager he made in his image.The New York Times | It was titled, “Treasury’s Got Him on Speed Dial.” While much of the ground has been covered elsewhere, it is a worthwhile read for its window on the state of our financial system and the world of money management.

On one level, there is the guru culture of which I have written extensively (for example, in “i hired a guru”the research puzzle | As I say, “a guru is a consultant.”  It pays to keep that in mind and not fall in love with him. and “in him we trusted”the research puzzle | During a recent guest lecture to MBAs, I asked students to fill in the “in [blank] we trust” for today’s market.  One said, “Bill Gross.”) and which Gross has played very well throughout his career.  His youthful success in Vegas is the stuff ... continues

For those anxiously awaiting my next posting on the use of academic research by investment professionals (and who have waited a prolonged period of time for it), the title of this entry may seem like the end of the series.  To quote virtually every commencement speaker ever, this is not the end, but a beginning.  We commence from here.

In fact, it does mark the start of my second year of blogging, and also a change in the series on academic research, new chapters of which I will intersperse with other material going forward, rather than in sequence.the research puzzle | The postings to date in the series on academic research can be found via this index. It also marks the start of a new investment advisory business of mine.  It will provide more fodder for writing, although this space will not provide investment advice and will continue to focus on the “how” rather than the “what.”tjb advisors | Early readers of this posting can click through to a simple page that summarizes the advisory offerings; a complete website will be up soon. ... continues

There is much written these days about alpha and beta, with beta cast in the role of cheap market exposure and alpha playing that evasive ability to do better than the market, all statistical things considered, for which we are willing to pay the big bucks.  However, our concern today in this continuing series on academic researchthe research puzzle | This PDF shows the series to date (and will be updated as it evolves). is not the beta of one, but the use of one beta to value a security.

As I mentioned in my introductory piece of the series, there are a number of “go to” places to find interesting commentaries on academic research if you don’t want to sift through it on your own.  One of the sources I mentioned, CXO Blog, published something recently that caught my eye and serves as a convenient jumping-off point for today’s musings.CXO Advisory Group | Its summary of the two papers referenced is called “The Unreliability of Beta.”  A(nother) hat tip to them. ... continues

When first looking at a piece of academic research, it’s important to assess whether the analysis being performed approaches the problem as an investment practitioner would.  It took me a fair bit of time to see that I was going to illustrate that lesson right up front in this series by misunderstanding the purpose of the paper I intended to review, “Optimal Equity Valuation Using Multiples:  The Number of Comparable Firms,” by Ian Cooper and Leonardo Cordeiro of the London Business School.SSRN | The version I read was posted on SSRN in September of 2008.

In selecting the paper, I was searching for insight into the process of valuation and the common use of “comparables” by investment decision makers.  I favor using a “map” of valuation measures in a way that recognizes that there are many approaches:  some popular and some used infrequently, some incredibly labor intensive and others that can be calculated quickly using grade school math, ... continues

I once sent a piece of academic research to a practitioner, because I thought the topic would be of great interest, since it dealt directly with the type of analysis performed by his firm.  The response was basically, “Let’s see how the experts would fare trying to make decisions on these stocks.”

This posting begins a series (currently of indeterminate length) of postings on academic papers that I have found of interest of late.  Prior to digging in, it makes sense to set the stage a bit.

I believe that investment puzzles should be looked at from a variety of different perspectives, including that found in analyses that we commonly lump within the rubric of “academic research.”  The extent to which investors and investment firms pay attention to the flow of this research varies dramatically, with it being part and parcel of the process at many quant shops, but ignored entirely by many others, which I think is a mistake.  There are insights to be ... continues