Author: Yuval Taylor

For almost fifty years people have written about a “low-beta anomaly,” and despite a lot of literature on the subject, nobody has been able to figure out what exactly causes it. The Capital Asset Pricing Model (CAPM), which was developed in the 1960s by William Sharpe (the inventor of the…

Share turnover is the volume of a stock traded divided by its shares outstanding (or by its float). In this article I want to show what this metric is good for. (This article is based loosely on a recent working paper by Maria Kasch, a professor at Humboldt University of…

The other night I asked my son, a high school student who knows next to nothing about economics or the stock market, “Which is more likely to grow faster, a small company or a large company?” He answered, “A small company.” Then I asked him, “Which will rise in price…

Operating margin is very simply defined: operating income divided by sales. If a company’s operating margin is growing, then either its income is rising, its sales are slowing, or both. If its operating margin is shrinking, then either its income is falling, its sales are rising, or both. This isn’t…

The price of a stock is the number-one thing most investors look at when deciding whether or not to buy shares in a company. But maybe it shouldn’t be. The hypothesis behind fundamental analysis is that one can compare the price of a stock to the price that, in an…

(Originally William F. Sharpe, Beta, and the Paradox of Risk-Adjusted Returns) Money managers like to take into account not only the potential returns of an investment but also the amount of risk involved. They use all sorts of formulae to quantify this balance: alpha, beta, the Sharpe ratio, the Sortino…