The CFP Board Center for Financial Planning has published the second edition of Financial Planning Review. The issue features important research findings that would benefit the financial planning profession, including a paper co-authored by Harry Markowitz, who got the 1990 Nobel Memorial Prize in Economic Sciences.
“Dr. Markowitz’s contribution to Financial Planning Review is truly a defining moment in the academic world of financial planning,” said Charles R. Chaffin, Ed.D., executive editor of the Review. “Having Dr. Markowitz contribute to financial planning’s body of knowledge helps to further advance the academic discipline of financial planning.”
The paper conclude that: (1) many of the reported financial anomalies published in the 1979–1999 time period maintain their statistically significant active (or excess) returns; (2) the anomalies are larger in non-US markets than in the United States.; and (3) reasonable transactions costs do not destroy the excess returns.
“The implications for investors, financial planners, and advisors are strong: each should be aware of these effects and should make use of the knowledge of such risk premium or alpha sources when constructing portfolio allocations,” write the Review’s co-editors, Vicki Bogan, Ph.D., Chris Geczy, Ph.D., and John Grable, Ph.D., CFP®. “If not, investors, financial planners, and advisors should at least be aware of the risk-sharing (or alpha give-up) they experience when they are on the other side of investors capturing the benefit of these returns.”