Evidenced-Based Investing

How Academic Research Transformed Investing

Here’s link to my ETFatlas podcast, hosted by Jack Lempart

https://academy.etfatlas.com/evidence-based-investing-how-academic-research-transformed-investing-larry-swedroe/

We discussed:

• Understanding alpha versus beta and why Wall Street often misuses these terms to mislead investors

• The Capital Asset Pricing Model (CAPM) and its evolution into multi-factor models developed by Fama and French

• How Benjamin Graham and Warren Buffett’s “alpha” became systematic beta through the discovery of value and quality factors

• The incredible shrinking alpha: why 98% of active managers fail to generate statistically significant outperformance

• The disappearing pool of victims—how the shift from 90% retail investors to 90% institutional traders eliminated easy profits

• The importance of proper risk-adjusted benchmarking when evaluating fund performance

• Factor investing explained: market beta, size, value, momentum, profitability, and quality factors

• The behavioral finance mistakes investors make, including overconfidence, recency bias, and confusing information with knowledge

• Why passive, evidence-based investing strategies outperform active management, especially after accounting for taxes and fees

• The hidden costs of active investing: expense ratios, trading costs, bid-offer spreads, market impact, and cash drag

• Larry’s “big rocks” philosophy: prioritizing what truly matters in life over the futile pursuit of beating the market