Featured and Latest Posts
The Size Premium Myth? Why Small May Need Friends
The so-called ‘size premium’—the idea that small companies reliably beat large ones, has always sounded intuitive. Smaller firms are riskier, less liquid, and harder to hold, so they should deliver higher returns. Yet the evidence is far from clear. Long-term data show bursts of small-cap outperformance, but these gains are patchy, fragile, and often vanish once you adjust for higher market betas. What really drives results is the company type: small-cap value and high-quality firms have consistently delivered, whilst small-cap growth has been persistently weak. The charts in this post make it plain—size on its own is not a premium, but paired with value and profitability it remains a powerful portfolio building block.
Are US Equities in a Bubble? Or Just Priced for a Different World?
Whenever the S&P 500 makes new highs, ‘bubble’ talk returns. Valuations are undeniably rich—CAPE in the high 30s and forward P/Es above long-run norms, but ‘high’ is not the same as ‘irrational’. A lower and more stable inflation/real-rate backdrop, an economy heavier in intangibles, accounting changes, curated index construction, and easier market access can all support a higher equilibrium multiple than in earlier decades. The takeaway is that from rich starting points, long-run returns tend to be lower.
Understanding Key Financial Ratios in Modern Portfolio Theory
Investing is about more than just chasing returns—it’s about understanding the risks that you’re taking to get them. Financial ratios grounded in Modern Portfolio Theory (MPT) help investors evaluate performance in a structured way, accounting for both total volatility and market sensitivity.
From standard deviation and beta—which capture different types of risk—to the Sharpe ratio, alpha, and the information ratio—which assess how efficiently returns are earned—these metrics offer powerful insights into the true quality of an investment.
Used together, they don’t just measure performance, they help investors make better, more informed decisions.
Who Really Determines Stock Prices? The Surprising Influence of Retail Investors
Traditional theory holds that stock prices reflect fundamental value, adjusting efficiently as rational investors incorporate new information. But recent research by Ralph Koijen and others turns this view on its head. Their findings reveal that markets are far more sensitive to shifts in investor demand than standard models predict—and retail investors play a much bigger role than previously assumed.
In theory, buying 1 per cent of a stock should move the price by just 0.02 per cent. In reality, Koijen shows it moves by roughly 1 per cent—a 5,000-fold difference. The reason? Demand is far more inelastic than standard models assume. And when Koijen examines who is actually driving this volatility, he finds that retail investors and smaller institutions—not large institutions—are the key contributors to cross-sectional price movements.
This inelasticity has profound implications. Prices can deviate significantly from fundamentals for prolonged periods, and arbitrage is often too constrained to correct them quickly. The result is a market that may remain efficient over the long run—but behaves far more irrationally, noisily, and sentimentally in the short term than traditional finance theory would suggest.
Good financial decisions aren’t about predicting the future—they’re about following a sound process today.
In investing, outcomes are noisy. Short-term performance often reflects randomness, not skill. Yet fund managers continue to pitch five-year track records as if they prove anything. They don’t.
As Ken French puts it, a five-year chart ‘tells you nothing’. The real skill lies in filtering out the noise—evaluating strategy, incentives, costs, and behavioural fit.
Don’t chase what worked recently. Stick with what works reliably.