Investment Theory Archives

Investment Theory

Introducing P-CAPE: Incorporating the Dividend Payout Ratio Improves Our Favorite Estimator of Stock Market Returns

June 19, 2024 — The Cyclically-Adjusted Price Earnings ratio, also known as CAPE, has served many investors well - but here at Elm, we think it might be time for an update.

Investment Theory

TIPS Do Offer Valuable Inflation Protection - But You Need to Decide What You’re Protecting

May 7, 2024 — TIPS are a seemingly attractive counter to inflation-related worries, but do they really offer the protection investors are hoping for?

Investment Theory

Merton Share Derivations: What's in your denominator?

May 2, 2024 — Balancing one's portfolio between risky and risk-less assets is no small feat, but there's one rule of thumb that we've found to be largely reliable: the Merton Share.

Investment Theory

Thinking Outside the BOXX

February 27, 2024 — There’s been a lot of excitement about BOXX, a new ETF designed to give investors short-term returns with the tax character of long-term capital gains...but is there a catch?

Investment Theory

Sharpe’s Arithmetic and the Risk Matters Hypothesis

December 1, 2023 — Sharpe’s Arithmetic may seem strange at first, but many see it as being one of the main drivers of the massive growth of index investing.