Behind the Markets Podcast

Behind the Markets Podcast: Robert Novy-Marx

Sep 15, 2023

Guest Robert Novy-Marx, an award-winning finance professor, discusses the predictive power of value research, the underperformance of value stocks due to sector tilts, and the difference between gross profits and net income. He also previews his upcoming presentation on reversals and liquidity provisions at the Wharton School's conference. The podcast also covers market trends, the impact of oil prices on the economy, recent news on tech valuations, factor investing, and concerns about AI in finance.

53:22

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Episode guests

Robert Novy-Marx

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Quick takeaways

Value investing remains a viable strategy, even though it has underperformed in recent years due to sector tilts.

Understanding reversals and liquidity in the stock market can help optimize transaction costs and improve strategy implementation.

Deep dives

Impact of Inflation on the Economy

The podcast discusses the current state of inflation and its impact on the economy. Despite some inflationary pressure, the real economic activity remains strong. Retail sales are above expectations, PMI reports are positive, and initial jobless claims remain low. Oil prices have risen, which affects trade on international markets. The focus should be on the strength of the real economy, as it has a more significant impact on earnings and investment decisions than the potential actions of the Federal Reserve regarding interest rates.

Introduction

2min

Oil Prices and Economic Impact

6min

Analysis and Discussion of Recent Market News and Valuations

3min

Factor Investing and the Predictive Power of Profitability

21min

Factor models and their impact on stock market

7min

Reversals and Liquidity Provisions

11min

Exploring Big Questions and Concerns about AI in Finance

3min

Show from 9/15/23 Prof. Siegel joins Jeremy Schwartz with a breakdown of a very big week for the market. He does note an increase in inflation but it shouldn’t result in an increase for next week. He also discusses the large rise in oil, noting long lines at gas stations and the impact the rise will have. He previews the upcoming week with a prediction that it will be hawkish. He finishes with a quick comment about the Arm IPO. (12:03) Professor Robert Novy-Marx starts off by talking about his educational past and how he got into his finance career today. He gives us his thoughts on value research and why he has confidence in it as a factor. He also details that the underperformance of value stocks is due to sector tilts. Jeremy asks Robert about his thoughts about the research on intangible assets and tech investments that are not capitalized. He goes into detail on the difference between gross profits versus net income. They discuss how Robert will be presenting at the Wharton School’s Jacobs Levy Equity Management Center for Quantitative Financial Research at its 2023 Frontiers in Quantitative Finance Conference next friday. He talks about the paper he will be presenting called Reversals and the Return to Liquidity Provisions. Guest: Professor Robert Novy-Marx earned the Fama/DFA Prize for the best capital markets/asset pricing paper in the Journal of Financial Economics (2012 and 2013), the Smith-Breeden Prize for the best capital markets paper in the Journal of Finance (2011), the Spängler IQAM Prize for the best paper in the Review of Finance (2011), and the Mill's Prize for the best paper in Real Estate Economics. Novy-Marx is also a former professional triathlete, a member of the National Bureau of Economic Research and taught at the Booth School of Business before coming to the Simon School. Learn more at: https://simon.rochester.edu/digital-measures-faculty/robert-novy-marx Follow Robert on LinkedIn: linkedin.com/in/robert-novy-marx-b931a6174

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