In my previous post I highlighted the flaws associated with Beta (β), in this post I would like to explore the proper use of Beta. Studies have shown that managed portfolios only outperform the S&P500 Index about 1/3rd of the time in both bear and bull markets - this means that for 2/3rds of the time it is better to just invest your money in an index fund, and...

The following is a brief list of definitions for beta from various textbooks and research papers.  Though brief, I believe that this is a representative sampling of the modern perceptions regarding beta. Damodaran – “standardized measure of the risk that investment adds to the market portfolio.”  “Statistically, the beta of an investment measures how it co-­‐varies...

Whether you are an employee, a business owner, or a shareholder, you may have wondered what an incremental dollar of investment is worth to your company. First it depends upon the cost of funding (F%) for an incremental dollar of investment ($I), and second the return (R%) that you earn on that incremental dollar of investment.  The dollar value ($V) created by the...

In my previous two posts regarding the Markowitz Portfolio Theory, I did not consider the dividend yield in the optimization to reduce the complexity of the model.  In this post I will explore the impact of adding the dividend yield to portfolio selection, plus verify the stock’s selected by checking if they are presently undervalued. You can download the...

Recently I evaluated ShopNBC (Ticker VVTV) which is owned by ValueVision Media Inc.  What became apparent immediately is that the company has had a negative EBIT for the past 10 years.  This then raised two questions:  (1) why do they have negative operating earnings, and (2) how can they sustain negative operating earnings for this long?  Their stock is currently...