Financial Economics - intellectualfinance.com

Cognitive Dissonance in Brussels: Why It Took Two Years to Admit the Truth (2010)

There is a particular kind of stubbornness that only committees can produce. An individual, confronted with obvious evidence that something is broken, will eventually accept reality. It might take a day, a week, maybe a month. But a committee? A committee of sovereign nations bound together by a shared currency and a deeply fragile sense […]

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The Physics of Finance: Why Doubling a $10B Market Cap is 10x Harder Than a $1B

Financial Economics, Financial Markets, Investing

Most investors treat market capitalization like a number on a scoreboard. A company worth ten billion dollars is simply ten times bigger than one worth a billion. This arithmetic thinking makes intuitive sense until you actually try to double these companies and discover that the laws of finance behave more like the laws of physics

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Why a “Strong Economy” Can Actually Be Bad News for Your Portfolio

Financial Economics, Financial Markets

Everyone loves good economic news. Rising GDP, falling unemployment, consumer spending through the roof. Politicians celebrate it, financial commentators cheer it, and your neighbor won’t stop talking about how great business is at his company. The economy is humming, and naturally, your portfolio should be soaring too. Except it doesn’t work that way. Here’s the

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Stop Chasing the Next Big Thing: Fama-French Proves You Just Need Three

Financial Economics, Investment Theory

Every year, the same story plays out in living rooms and coffee shops around the world. Someone mentions they made a killing on some stock. Everyone else feels a pang of regret. Why didn’t I see that coming? Why am I always late to the party? And so begins another cycle of reading newsletters, watching

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The Bitcoin Problem: Where Does Crypto Fit into a Modern Portfolio Theory Strategy?

Must Read, Editors Pick, Financial Economics, Investment Theory

Harry Markowitz won a Nobel Prize in 1990 for work he published in 1952. That work, Modern Portfolio Theory, changed how we think about investing. Now, seventy years later, a technology he could never have imagined is forcing us to reconsider what his theory actually means. Bitcoin presents a peculiar challenge. It behaves nothing like

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