What we are reading

Most of the books below are those I have read over the last 12 to 18 months that have either informed or inspired me. The others have been read and recommended by the team. I have also listed a small number of academic articles that are important to the theoretical underpinnings of how we invest at JF Capital Partners.

Michael Fitzsimmons, Chief Investment Officer

Books

Robert Bruner and Sean Carr, "The Panic of 1907: Lessons Learned from the Market's Perfect Storm". John Wiley and Sons, 2007

George Cooper, “The Origin of Financial Crisis”. Vintage Books, 2008

Milton Friedman and Anna Jacobson Schwartz, “A Monetary History of the United States, 1867-1960”. Princeton University Press, 1963

Bruce Jacobs, “Capital Ideas and Market Realities: Option replication, investor behavior and stock market crashes”. Blackwell Publishers, 1999

John Maynard Keynes, “Essays in Persuasion”. Macmillan Cambridge University Press, 1931

Peter Bernstein, “Against the Gods: The remarkable story of risk”. John Wiley and Sons, 1996

Nassim Nicholas Taleb, “Fooled by Randomness: The hidden role of chance in life and in the markets”. Penguin Books, 2004

William Poundstone, “Fortune’s Formula: The untold story of the scientific betting system that beat the casinos and Wall Street”. Hill and Wang, 2005

Paul Carroll and Chunka Mui, “Billion Dollar Lessons: What you can learn from the most inexcusable business failures of the last 25 years”. Penguin Group, 2008

Daniel Dennett, “Darwin’s Dangerous Idea: Evolution and the Meanings of Life”. Penguin Books, 1995

Thomas Kuhn, “The Structure of Scientific Revolutions”. The University of Chicago Press, 1962

Journal articles

James Doran, “A Simple Model for Time-Varying Expected Returns on the S&P 500 Index”, with Ehud Ronn and Robert Goldberg. Department of Finance, University of Texas at Austin, June 2005 Revised: August 13, 2006
Doran, Ronn and Goldberg support the notion of allowing the short-term ERP to vary with VIX while holding the long-term ERP fixed.

Robert Engle, “Estimation of Time Varying Risk Premia in the Term Structure: the ARCH-M Model", with David Lilien and Russell Robins. Econometrica 55, 1987 pp. 391-407
Engle is as pioneer of work that examines the predictive power of market volatility and market returns. I could list many of his articles here but his body of work can be found at: http://pages.stern.nyu.edu/~rengle/.

Tim Bollerslev and Hao Zhou, "Expected Stock Returns and Variance Risk Premia" CREATES Research Papers 2007-17. School of Economics and Management, University of Aarhus, 2007
Bollerslev and Zhou show that the volatility risk premium (the difference between the VIX and the realised volatility of the S&P500 index) forecasts equity returns better than other commonly used forecasting variables, such as PE ratios and the term spread.

Andrew Ang, Bob Hodrick, Yuhang Xing and Xiaoyan Zhang, "The Cross-Section of Volatility and Expected Returns". Journal of Finance, 61, 1, 2006 pp.259-299
Ang, Hodrick, Xing and Zhang show that VIX innovations are significant factors for the cross section of equity returns.

Franco Modigliani, and Merton Miller, "The Cost of Capital, Corporation Finance and the Theory of Investment". American Economic Review 48 (3): 261–297, 1958

Gershon Mandelker and S. Ghon Rhee, “The impact of the degrees of operating and financial leverage on systematic risk of common stock”. Journal of Financial and Quantitative Analysis, March, 45-57, 1984