A few days before the tech bubble burst in March 2000 after the Nasdaq index reached an all-time high of 5,048, Jeremy Siegel — author of the best-selling book, Stocks for the Long-Run — wrote an op-ed for the Wall Street Journal. The provocative headline was “Big-Cap Tech Stocks Are a Sucker Bet.” He claimed that high valuations of tech stocks weren’t justified based on historical price-to-earnings ratios. He concluded, “Despite our buoyant view of the future, this is no time for investors to discard the lessons from the past.”

A few days before, Siegel had appeared on CNN’s Moneyline…

The small Central American country of El Salvador (population 6.5 million) recently became the first country to make bitcoin legal tender. The country now holds 550 bitcoins, currently worth around $25 million. Is this small country — and the world for that matter — ready for bitcoin as an actual medium of exchange? How volatile is bitcoin compared with other currency fluctuations relative to the U.S. dollar? As a follow-up to my earlier blog that described the risk and return of bitcoin, I compare the volatility of bitcoin price changes with that of 22 currencies based on daily data back…

Modern portfolio theory (MPT) dates back to the 1950s with Nobel laureate Harry Markowitz’s seminal article and subsequent book of the same name, Portfolio Selection. Markowitz presented a model for the risk and return on investments, and articulated the benefits of diversification through mathematical modelling. MPT concepts later led to the development of the securitization of assets, an important tool for hedging risk, but one with a tarnished reputation surrounding the pooling of sub-prime mortgages that contributed to the Financial Crisis of 2007–2009. And yet these “modern” concepts and innovations date back at least to the 18th century, in France…

How should you decide whether or not to buy a stock? Well, you can join a stock investing community and simply buy what others are suggesting as the next hot stock. Maybe it will become a meme stock and go to the moon, and you’ll be so rich that you’ll never have to work again! There’s another way, known as fundamental analysis, that involves a lot more time and effort, and doesn’t promise that you’ll get rich quick or beat the market. But you can give it a try, by starting with hypothetical stock purchases that you can track, say…

I’m posting on the release date for my book with Andrew Lo of MIT’s Sloan School of Management, In Pursuit of the Perfect Portfolio: The Stories, Voices, and Key Insights of the Pioneers Who Shaped the Way We Invest, Princeton University Press. What’s it like to have a book published that was a decade in the making? Lots of emotions including, joy, relief, excitement, and even a tinge of sadness, as the book finally hits the bookshelves and an incredible journey ends. It’s been a heck of a ride and I’ve learned a lot along the way. …

I often tell students in my introductory finance courses that to understand finance you first need to learn the language of finance. Not knowing a foreign language can be a barrier in dealing with foreign businesses; and similarly, not knowing the language of finance can be a communications barrier. Even if your goal isn’t to be a finance professional, you probably spend at least part of your time communicating with finance and accounting professionals within your organization. Knowing the language of finance can give you confidence so that you can at least follow conversations, and even contribute. I’ll review the…

If you’re a long-suffering New York Mets fan, then you probably suffer a bit more when July 1st rolls around. That’s the day, known as Bobby Bonilla Day, when the former Mets player, who had the remaining year of his contract for $5.9 million bought out in 2000, collects his annual $1.19 million paycheck. He’s been receiving them since 2011, and will continue receiving them through 2035, for a total of $29.8 million. This sounds like the deal of the century. How can we make sense of a long-retired player collecting a salary that’s more than what a third of…

Here’s a headline from a Washington Post article by Paulina Villegas on June 16, 2021 (there were many similar headlines around the world as well): “Cristiano Ronaldo snubbed Coca-Cola. The company’s market value fell $4 billion.” The article referred to soccer’s (football’s) Portuguese superstar, who sat down at a press conference on June 14, 2021 during the European Championship and proceeded to remove two bottles of Coke that were prominently displayed on the table in front of him (Coca-Cola was one of the tournament’s official sponsors). He replaced them with a bottle of water, saying, “Agua. No Coca-Cola.” It was…