Research and Policy Center

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New research this week on #VoluntaryCarbonMarkets, a comment letter to the FRC Stewardship Code Consultation, and #EnterprisingInvestor blogs. Read all our new content at: https://lnkd.in/epXaT-GP

Hedge funds can serve as legitimate diversifiers, but blind allocation is risky, cautions Raymond Kerzérho, CFA, MBA in #EnterprisingInvestor. While certain strategies have shown consistent diversification benefits, others introduce financing, liquidity and extreme loss risks that investors must evaluate carefully, he writes for #EnterprisingInvestor. Key Takeaway: Traditional risk measures like standard deviation and correlation don’t always capture the full picture—skewness, kurtosis, and tail-risk exposure are critical considerations. Read the blog: https://lnkd.in/ejt33rAV

As market conditions, workforce demographics, and regulatory landscapes evolve, continuous assessment and strategic decision-making will be key for DC plan success. Target date fund selection, fee transparency, investment lineup evaluation, and staying ahead of regulatory and litigation trends are top priorities for DC plans in 2025 say Christopher Dall, CFA,?Taylor Wagner, AIF??and?Deana Harmon, CIMA?, AIF?, MBA, in today's #EnterprisingInvestor. Read the blog: https://lnkd.in/eD4RjXvX

Many investors use the PEG ratio to identify undervalued stocks, but does it work as a broad market signal? Derek Horstmeyer ???? from George Mason University and his students?Gopika Patel?and?Michael Lee Lee review PEG data for the S&P 500 (1985 to 2020) and tested its effectiveness as a trading strategy in #EnterprisingInvestor. They found mixed results using Yardeni Research’s PE ratio and its estimates of forward growth rates for the same period. Key Takeaway: The PEG ratio falls short as a market timing tool. A broader analytical approach, incorporating macro and fundamental factors, is essential for investment decision-making. Read the blog: https://lnkd.in/ea5AZE3F

NEW RESEARCH! Today, the CFA Institute Research and Policy released a new report which explores current challenges for the voluntary carbon market and how it can be more efficient in supporting investment in carbon reduction and removal initiatives. Author Winnie Mak identifies policy and market gaps and suggests possible solutions to improve the voluntary carbon market as a tool to support climate change mitigation and complement compliance market regimes. Read the full report at https://lnkd.in/e_6gSKfC

Liquidity crises don’t always start with fundamental financial distress—sometimes, fear alone is enough to trigger a bank run. The Diamond-Dybvig Model provides a foundational framework explaining why banks, despite their critical role in the economy, are inherently vulnerable to self-fulfilling liquidity crises, writes William W Hahn, CFA in #EnterprisingInvestor. Why do bank runs happen? Banks transform illiquid assets into liquid liabilities, creating value but also exposure to liquidity risk. If depositors believe others will withdraw en masse, their best response is to withdraw first, reinforcing the panic. The Fragility of Confidence: Expectations drive reality—investors don’t need new financial shocks for a crisis to emerge. Depositor sentiment alone can shift equilibrium from stability to insolvency. Policy Responses Matter: Central banks and regulators play a crucial role in stabilizing confidence. Tools like deposit insurance and lender-of-last-resort financing help break the cycle of panic and prevent unnecessary collapses. Key Takeaway for Investment Professionals: Liquidity risk isn’t just about fundamentals—it’s about perception and confidence. Understanding how liquidity crises unfold is essential for managing risk in financial markets. Read the blog: https://lnkd.in/gEx8h5RE

REGISTER TODAY! Marcos Lopez de Prado joins Frank Fabozzi, CFA to delve into the challenges and opportunities of applying machine learning to finance. Attendees will gain actionable insights into:? ?? Why causality is a critical factor for achieving efficient portfolios? ?? How emerging AI-driven methodologies are reshaping investment practices? ?? Practical steps to integrate scientific rigor into your investment strategies Click here to register: https://lnkd.in/efug7jbG

Our egos are hardwired to fall into the trap of confounding luck and skill. By recognizing the role of chance and reinforcing analytical discipline, investment leaders can build more resilient strategies and teams, advises Sébastien Page, CFA in #EnterprisingInvestor. Key Takeaway: Great investment leadership isn’t about being right all the time — it’s about fostering a process that prioritizes sound decision-making over short-term outcomes. Read the blog: https://lnkd.in/ecE492kz

JUST RELEASED! Authors Nga Pham, CFA., Bei Cui, PhD, and Ummul Ruthbah examine the historical performance of the 60/40 equity/bond portfolio. They highlight its benefits, challenges from variable stock–bond correlations, generational differences, market-specific risks, and the role of alternative assets. “The Performance of the 60/40 Portfolio: A Historical Perspective” is the first of a two-report series. The second report will assess the 60/40 strategy’s future viability. Read the report: https://lnkd.in/enVRwgp3 Monash University, CFA Institute