Robert Stambaugh - Faculty Research in Knowledge@Wharton

If Index Funds Perform Better, Why Are Actively Managed Funds More Popular?

Wed, 02 Feb 2011 15:51:26 EST

It's been nearly 35 years since the precursor to The Vanguard Group offered the first index-style mutual fund to individual investors. Indexing now accounts for about $1.6 trillion in investor assets, and index funds have consistently beaten "actively managed" funds. But if this is true, why do a majority of investors still choose active management? Wharton finance professor Robert F. Stambaugh and colleague Lubos Pastor offer their perspective in a new research paper titled, "On the Size of the Active Management Industry."

Efficient Markets or Herd Mentality? The Future of Economic Forecasting

Wed, 11 Nov 2009 16:18:47 EST

Once on the academic fringes, behavioral economics has been gaining considerable ground over the past year. While not all economists, government policy makers and corporate financiers agree wholeheartedly with behavioral economists' assertion that markets are inefficient and irrational, it's difficult in the wake of the global financial meltdown to be too dismissive of it, according to some Wharton faculty members. It's likely, they say, that future regulations will be shaped in part by both behavioral economics and the efficient market theory, which has dominated government policymaking since the early 1980s.

The Impact of High-frequency Trading: Manipulation, Distortion or a Better-functioning Market?

Wed, 30 Sep 2009 17:48:04 EST

According to some estimates, high-frequency trading by investment banks, hedge funds and other players accounts for 60% to 70% of all trades in U.S. stocks, explaining the enormous increase in trading volume over the past few years. But critics of the practice worry that those profits are coming out of ordinary investors' pockets. Defenders, on the other hand, say high-frequency trading improves market liquidity, helping to insure there is always a buyer or seller available when one wants to trade. Wharton faculty and others weigh in.

Why Stock-price Volatility Should Never Be a Surprise, Even in the Long Run

Wed, 29 Apr 2009 14:19:24 EST

Equities are subject to much wider price swings than previously understood, according to a recent paper co-authored by Wharton finance and economics professor Robert Stambaugh. The research adds a new perspective to the work of Wharton finance professor Jeremy J. Siegel, author of the book Stocks for the Long Run, which says stock returns more than offset risks if you stay with the market through its ups and downs. In a recent interview with Knowledge@Wharton, the professors described their views about the market's long-term behavior.

What's Ahead for the Stock Market -- and Quant Funds

Wed, 22 Aug 2007 13:35:36 EST

After weeks of skittishness and fear, investors showed signs on Tuesday of settling down. "Yesterday was one of the dullest days in the market that we've had in a while, and that's good in many ways," says Wharton finance professor Jeremy Siegel. Investors have been reeling from widespread problems in the subprime sector, stocks have fallen, yields on Treasury securities have dropped and some companies are finding it hard to borrow money -- all of which spurred the Federal Reserve last week to announce a cut in interest rates. Meanwhile, the upheaval has shown that quant funds, despite their computer power, aren't immune to mistakes and market downturns. So what can we expect in the weeks ahead?

How Can Employers Improve Defined Contribution Plans?

Wed, 18 Oct 2006 16:48:45 EST

If 401(k)s and similar plans are the main way Americans invest for retirement, how can employers improve them? By making enrollment automatic, minimizing the use of the employer's stock, expanding the role of annuities and improving employees' financial knowledge, according to a set of recommendations issued by the Financial Economists Roundtable, a group of about 50 prominent economists, including several Wharton faculty members.

Don't Sweat the Inverted Yield Curve: No One Really Knows What It Means

Wed, 25 Jan 2006 15:13:16 EST

Consider the inverted yield curve as the equivalent of an economic bogeyman. It's when the natural order up-ends and short-term interest rates are higher than long-term ones. The Treasury bond yield curve inverted December 27 for the first time in five years. That gave shudders to those who see the phenomenon as a harbinger of recession. And yet, the U.S. economy is strong, and surveys show most forecasters think it will stay that way. So what does the inverted yield curve really mean? Wharton professors offer some perspectives.

Risks and Costs of Socially Responsible Investing

Wed, 13 Aug 2003 00:00:00 EST

Socially responsible investors don't want their money to support companies that do things they disapprove of, such as selling tobacco, alcoholic beverages or weapons. They may be willing to sacrifice some financial returns for their convictions -- but how much must they give up? In one of the first studies of socially responsible investing on a risk-adjusted basis, Wharton's Christopher C. Geczy, Robert F. Stambaugh and David Levin show that index-style investors may pay a modest price for investing in socially responsible funds. For investors who favor actively managed funds, though, the cost could be much higher.

Are Analysts Playing Us for Suckers?

Wed, 04 Jul 2001 00:00:00 EST

Wall Street analysts relentlessly cheered the dot-com mania that pushed technology stocks to stunning gains in 1999. But even after those stocks went into a tailspin in 2000, few analysts urged investors to sell. Such behavior has drawn the attention of both the Securities and Exchange Commission and the U.S. Congress, which held hearings on the subject in mid-June.

A Fresh Look At Mutual Funds� Performance Data

Wed, 28 Mar 2001 00:00:00 EST

For mutual fund analysts, new insights into evaluating a fund�s performance don�t come along every day. Lately, though, financial experts at Wharton and other schools have collaborated on research that challenges some long-held notions about which funds are best for investors. Included in that research is a paper by Lubos Pastor of the University of Chicago and Wharton�s Robert Stambaugh on how to improve standard benchmarks used to predict fund performance.