The Stingy News Weekly (12/19/2010)
Coming in from the cold
"The consoling thought for Ireland’s put-upon taxpayers has been “at least we’re not Iceland”, whose outsize banks failed spectacularly in 2008. But that comfort is fading. Evidence of economic recovery in Iceland means the Irish can no longer persuade themselves that things are worse elsewhere."
"Active share can have a direct influence on returns. Looking at U.S. stock fund performance in the 20 years ending 2009, Prof. Petajisto found that the most active stock pickers beat their benchmarks by 1.26 percentage points annually after fees. On average, funds with lower active share didn't beat their benchmarks."
Toronto a city of socioeconomic extremes
"Toronto is becoming a city of stark economic extremes as its middle class is hollowed out and replaced by a bipolar city of the rich and poor – one whose lines are drawn neighbourhood by neighbourhood."
Accounting for Leverage
"This paper lays out a decomposition of book-to-price (B/P) that articulates precisely how B/P 'absorbs' leverage. The B/P ratio can be decomposed into an enterprise book-to-price (that pertains to operations and potentially reflects operating risk) and a leverage component (that reflects financing risk). The empirical analysis shows that the enterprise book-to-price ratio is positively related to subsequent stock returns but, conditional upon the enterprise book-to-price, the leverage component of B/P is negatively associated with future stock returns. Further, both enterprise book-to-price and leverage explain returns over those associated with Fama and French nominated factors - including the book-to-price factor - albeit negatively so for leverage. The seemingly perverse finding with respect to the leverage component of B/P survives under controls for size, estimated beta, return volatility, momentum, and default risk."
Jim Otar's Christmas freebie
"I'd be happy to make the green edition of my book 'Unveiling the Retirement Myth - Advanced Retirement Planning based on Market History', a textbook on non-Gaussian approach to retirement planning, to your readers for a limited time, from now until January 2nd."
BoC December 2010
"The Bank of Canada has released the December 2010 Financial System Review which includes reports on: The Countercyclical Bank Capital Buffer: Insights for Canada, Strengthening the Infrastructure of Over-the-Counter Derivatives Markets, Central Counterparties and Systemic Risk, Contingent Capital and Bail-In Debt: Tools for Bank Resolution"
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