SMITH BRAIN TRUST – What stocks do the smartest fund managers love, and are they worth knowing?
Recently exploring this question, Investors Chronicle revisited a 2012-published study by Maryland Smith’s Russell Wermers showing mutual fund managers, in aggregate, have better stock selection abilities than other investors.
Institutional investors own more than two-thirds of corporate equities, and they account for an even greater percentage of trading volume. Because they make up such a large share of the market, when these pension funds, mutual funds, insurance companies, hedge funds, endowment funds, and other behemoth investors buy and sell based on news, it moves market prices for everyone.
Factors and implications surrounding the financial crisis of 2008 was the focus of a recent presentation by Martin J. Gruenberg, chairman of the Federal Deposit Insurance Corporation, hosted by the Center for Financial Policy at the University of Maryland’s Robert H. Smith School of Business.
President Donald Trump’s proposed plan to reform the tax code, as revealed in a one-page outline last week, would benefit middle and lower-income households in three ways, but to varying degrees, says the Smith School's William Longbrake. The proposal would simplify filing requirements and reduce income taxes for many Americans, and lower significantly the tax rate for corporations and companies like his. Overall, says Longbrake, only “a negligible amount" of the estimated $3 trillion to $7 trillion in reduced taxes over the next 10 years would benefit low-income families. Read more...
U.S., European and Asian stock markets all fell in response to Greece rejecting austerity plans demanded by international creditors. But the market reaction was much more muted than analysts had expected. Those experts include Smith School executive-in-residence Bill Longbrake, who spoke to the Associated Press ahead of market openings on Monday. Longbrake said on Sunday night to “watch for how the Europeans handle the Greek bank run, which must be addressed in the next couple of days." Read more...
Not reaping the expected benefit of cheap oil, the U.S. economy shrank at an annualized pace of 0.7 percent in the first three months of this year. “When data do not fit expectations, the knee-jerk reaction is to look for excuses,” says Bill Longbrake, executive in residence at the University of Maryland's Robert H. Smith School of Business Center for Financial Policy. “Was it bad weather, the West coast dock strike, faulty seasonal adjustment methodology, the strong dollar, consumer reluctance to spend potentially temporary gas expense savings or something else?” He outlines a rippling effect of three culprits in his May 2015 Longbrake Letter. Read more...
Newly confirmed U.S. Attorney General Loretta Lynch has a strong record for going after mortgage fraud, Smith Professor Cliff Rossi tells Bloomberg Business. He anticipates that Lynch will reinforce predecessor Eric Holder’s actions to hold lenders accountable for their role in the 2008 financial crisis. Read more...
Say on Pay, which gives shareholders a nonbinding vote on executive compensation, leads companies to reduce excessive pay in certain circumstances. That's according to new research by Smith professor Russ Wermers and a coauthor. Previous academic studies of Say on Pay have found mixed results, with some concluding that the provision—part of the Dodd-Frank legislation and in effect since 2011—has had no effect. But Wermers says: "Say on Pay does empower small institutional shareholders." Read more...
More is better than less. “It’s not complicated,” AT&T explains in its popular television ads. Similar reasoning does not apply in foreign currency exchange, where strong is better than weak — except when it isn’t. For U.S. consumers the dollar’s recent surge means cheaper imports, lower inflation and hot deals on international travel. But it also means lower demand for exports, which slows economic growth. Kristen Fanarakis from the Smith School's Center for Financial Policy shares seven basic principles to help decipher the latest headlines. Read more...
Finding a stock picker who can beat the market can be daunting, as many mutual funds that outperform over a short period struggle to repeat the feat in the long run. Russ Wermers, professor of finance and director of the Center for Financial Policy at the Smith School, tells the Wall Street Journal’s Weekend Investor that figuring out which manager got lucky and which manager has skill is tough. “It’s incredibly difficult to judge the quality of a fund ahead of time,” Wermers said. Read the full article, How to Pick a Stock Picker.
