Three Key Issues for 2002 & Beyond
Three key issues will determine the prospects for the global economy: the likelihood of an impending recovery proving feeble or robust, and the outlook for sustainable longer-term growth.
Research Publications Archive
Mother Goose Revisited
If Goldilocks were the presiding genius of the fabled new economy of the roaring nineties, Humpty Dumpty may be more appropriate to the current situation. All the Fed’s horses and all the President’s men are working to put the U.S. economy back together again, but their conventional tools may prove inadequate.
Market Outlook
Three factors are critical in improving the prospects for the United Kingdom and Europe: a recovery in the U.S. economy, continued strength in U.K. consumer spending, and structural improvements in continental Europe. Although bond and equity markets have priced in expectations for a global economic recovery between the middle to end of 2002 because evidence…
Price Competition in Higher Education
The reasons most commonly cited for the seemingly inexorable slide toward the financial abyss are the relentless competition for high position in college rankings such as those invented by U.S. News & World Report; competition from taxpayer-subsidized public universities; and the inclination of even relatively affluent parents to bargain for more financial aid. Most at…
The Growing Importance of Endowment
Our data suggest that colleges with proportionally more endowment enjoy stronger pricing power and greater capacity to bridge the widening gap between operating revenues and expenditures. At the same time, the abrupt end to the sustained 1990s bull market increases the prospect that volatility in investment returns may put endowment support of operations at greater…
Portfolio Risk Measurement – Shortfall and Relative Risk Analysis
A discussion of how to think about and measure risk at two key stages in the investment management process: when constructing a coherent long-term asset allocation policy, and when implementing and evaluating that policy once developed.
The Name Is Bond, but Which Bond?
European investors are increasingly moving into bonds. Provided the economic downturn does not generate a higher than expected level of defaults, the high-yield market should provide opportunities for those able to tolerate a higher degree of risk. For the more staid, the embryonic euro inflation-linked bond market and U.K. corporate inflation-linked bond market provide opportunities…
Deflation Watch-Rising Risks?
High-quality, intermediate- to long-duration bonds can hedge against deflation. In the current environment of extremely low short-term interest rates and widespread expectations of higher rates in the future, investors should resist the urge to move into short-term bonds.
Earning Projections
Due to the consistent upward bias of analyst projections, investors should exercise caution in valuing equities on the basis of forward earnings expectations.
Writing Down Current U.S. Equity Valuations
The disparity among market commentators and analysts in their assessment of market valuations is unusually high today. Although our analysis suggested that the sharp price decline following September 11 brought the U.S. equity market close to fair value, the subsequent rise in the market and our closer analysis of the aggressive earnings assumptions required to…