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The Rational Reminder Podcast

Episode 326 - Dr. Sunil Wahal: Applying Financial Science

Oct 10, 2024
In this discussion, Dr. Sunil Wahal, the Jack D. Furst Professor of Finance at Arizona State University, shares his insights on investment success factors. He delves into profitability premiums and the synergy between academic theory and practical investing. Dr. Wahal critiques common misconceptions in financial theory and emphasizes the significance of a diversified investor base. He also addresses the complexities of factor investing versus passive strategies, offering actionable advice for building robust investment portfolios while navigating risks effectively.
01:16:36

Episode guests

Podcast summary created with Snipd AI

Quick takeaways

  • Dr. Sunil Wahal emphasizes the critical role of profitability premiums and the need for rigorous out-of-sample testing in financial research.
  • The podcast discusses the risks of momentum investing compared to low volatility strategies, highlighting the importance of understanding investment mechanics.

Deep dives

The Importance of Profitability Research

The discussion highlights the robustness of the profitability premium, particularly in pre-1963 data, showing substantial returns from high profitability portfolios. Sunil Wayhall emphasizes that rigorous, out-of-sample testing is essential in financial research, arguing that discoveries based solely on frequently studied data may lead to inaccurate conclusions. His extensive efforts to gather pre-1963 financial data involved manual data collection and verification, emphasizing the challenges and significance of achieving accuracy in such foundational research. The exploration of profitability illustrates its credibility as a financial concept, reinforcing its importance for investors.

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