Celebrating 60 Years of the Research Foundation
CFA Institute Research Foundation has been sponsoring independent investment research since 1965. Some of our most popular and instructive pieces are listed and summarized below. The earliest is William F. Sharpe’s 1975 inquiry (with co-authors) asking whether financial analysis is “useless,” as the efficient market hypothesis might suggest. (Financial analysis is not useless). A half-century later, we reviewed the accomplishments of our 25 James L. Vertin Award winners, who “have produced a body of research notable for its relevance and enduring value to investment professionals.” These luminaries include four Nobel laureates. All the Vertin Award winners can be counted among the most illustrious names in financial research and scholarship. Between these bookends is a wealth of thoughtful and inspiring reading. We hope you enjoy these Research Monographs and other pieces.
1960 -1980
Is Financial Analysis Useless?
This volume consists of the proceedings of the first CFA Seminar and examines the efficient market and random walk hypotheses from a variety of perspectives. William F. Sharpe set the stage by summarizing these theories. The other speakers made both supportive and critical comments. The talks by Michael C. Jensen and Jack Treynor are especially relevant to today’s investor.
Benjamin Graham, The Father of Financial Analysis
Benjamin Graham, The Father of Financial Analysis is a biography of the first master of value investing and author (or co-author) of Security Analysis and The Intelligent Investor. The book focuses on Graham’s work and personality rather than on his ideas, which are best understood by reading his books. Graham’s influence on the investment profession is so profound that almost a century after its first publication, Security Analysis continues to be updated, is in its seventh edition, and remains very popular.
1980 - 2000
Stocks, Bonds, Bills, and Inflation: The Past and the Future
Ibbotson and Sinquefield’s Stocks, Bonds, Bills, and Inflation collected, in one place, the returns on the most important U.S. asset classes starting in 1926, and parsed the data into a number of risk premiums (for example, the equity risk premium, consisting of stock returns minus riskless Treasury bill returns). The authors also set forth a method for making probabilistic forecasts of future returns, an innovation that has been essential to asset allocation and financial planning in the decades following the book’s initial publication. The forecasts have turned out to be quite accurate. The monograph has been updated frequently and a 2026 Century Edition is contemplated.
Country Risk in Global Financial Management
The authors explore issues in international investing. They find that expected returns are related to investor perceptions of country risk. Such perceptions are driven by economic convergence and growth rates as well as political and economic freedom, trade openness, and fiscal and monetary policy. On the fixed income side, country credit ratings are related to subsequent return.
2000 - Present
The Role of Monetary Policy in Investment Management
This monograph is a primer on “Fed watching” and its benefits and limitations for making investment decisions. The authors find that, at least in the United States over the period studied, if one could have forecast interest rate changes accurately, substantial short-term excess returns could have been earned. They also look at the effect of monetary policy on specific industries. The analysis is global and includes assets such as commodities as well as equities and bonds.
Lifetime Financial Advice: Human Capital, Asset Allocation, and Insurance
In Lifetime Financial Advice, the authors recommend integrating all of one’s assets — not just financial assets — into a lifecycle-based financial plan. Human capital, which is the present value of expected future income, is the most important asset for most people. Insurance assets, including annuities, round out the picture. A well-crafted financial plan takes account of the correlations among these varied assets, as well as the merits and risks of each considered separately.
Fundamentals of Futures and Options (corrected April 2014)
Derivatives, including futures and options, are poorly understood by many investors. This primer outlines the relationships between options and futures prices and the price of the underlying security or index from which they derive their value. The authors also explain the use of futures and options for hedging various risks. (A corrected version of this monograph was released in April 2014.)
A Comprehensive Guide to Exchange-Traded Funds (ETFs)
In the Guide, the authors cover all aspects of ETFs, from what they are and how they work to the different types of funds and how each fits into a portfolio. While providing new benefits to investors, ETFs also involve new risks relative to traditional mutual funds. ETFs are used to track broad indexes and to invest in rules-based (“smart beta”) strategies. There are ETFs on equities, fixed-income, commodities, currencies, and alternatives (absolute return and volatility strategies); and there are leveraged and inverse ETFs. The three expert authors help readers understand and use ETFs, an investment vehicle that enjoyed rapid growth at first and then even more growth since the publication of the Guide.
Financial Market History: Reflections on the Past for Investors Today
Financial Market History collects speeches and articles by the financial and economic historians convened at an all-star academic conference organized by the book’s editors and conducted at the University of Cambridge in July 2015. Stories and data from the Renaissance to the present day help investors better understand today’s problems and successes. The book shows that no matter what is in the headlines today, something like it has probably happened before.
A Primer For Investment Trustees: Understanding Investment Committee Responsibilities
Trustees of asset pools, such as retirement funds and endowments, are often chosen from outside the investment profession but take on responsibilities that require at least a basic understanding of investment principles, plus all-important process, structure, and governance issues. This book provides the beginning of an education on those topics. The authors use a worked example, featuring a hypothetical trustee named Molly, as an educational tool.
The Future of Investment Management
In a sweeping review that starts in ancient times and ends with the latest developments, Ronald N. Kahn traces the evolution of the investment management business and profession with an eye to identifying future trends. Among the types of funds Kahn expects to thrive in the future are index funds, smart beta or factor funds, pure alpha funds, and funds that seek objectives other than pure investment return.
Ten Years After: Reflections on the Global Financial Crisis
A decade after the Global Financial Crisis of 2007–2009, at a conference organized by CFA Institute and presented at New York University in November 2018, an illustrious group of academics, investment practitioners, central bankers, and regulators reflected on the origins and consequences of the crash. This book contains their presentations. The unifying theme, set forth by Andrew W. Lo, was “competing narratives of the crisis.”
ESG and Responsible Institutional Investing Around the World: A Critical Review
Pedro Matos reviews the literature on incorporating environmental, social, and governance (ESG) considerations into investment decisions. Important topics discussed include the role of institutional investors, such as activist investors and foreign investors, and the potential impact of recent growth in index-based strategies.
Robert C. Merton and the Science of Finance: A Collection
Robert C. Merton, winner of the 1997 Nobel Prize in Economics, made major contributions in option pricing, continuous-time finance, lifecycle investing, and many other areas. The Research Foundation co-sponsored a conference at MIT in 2019, celebrating Merton’s 75th birthday and featuring him and many of his colleagues and students. The present volume contains the conference speeches and papers.
Geo-Economics: The Interplay between Geopolitics, Economics, and Investments
Joachim Klement defines geo-economics as “the study of how geopolitics and economics interact in international relations.” He shows how the impact of war, terrorism, climate change, and “data – the ‘oil’ of the twenty-first century” can be quantified and related to economic variables and market returns. Of particular interest are Klement’s rules of forecasting, which include making moderate rather than extreme forecasts and if politicians and business leaders respond to incentives, whether the incentives are good or bad.
Investment Luminaries and Their Insights: 25 Years of the Research Foundation Vertin Award
Investment Luminaries summarizes the accomplishments of the James R. Vertin Award winners since the Research Foundation established the award in 1996. Each winner identifies his or her proudest accomplishments, most influential publications, lessons learned, expectations for the future, and regrets (if any). The winner then summarizes his or her life’s work in an essay. This compendium is a virtual encyclopedia of modern investment thinking.
Handbook of Artificial Intelligence and Big Data Applications in Investments
The Handbook of Artificial Intelligence provides a case-based overview of AI and big data applications in the finance industry. Practitioners offer details on experiences and solutions in applying machine learning and natural language processing in finance, including investment management, trading, and customer service.
