Professor Roger Ibbotson is a finance veteran whose research has helped shape investing for decades. But earlier this year, he had the chance to participate in a Wall Street ritual for the first time, when he rang the closing bell at the end of a day of trading at the New York Stock Exchange.
The occasion was the launch of the NYSE Zebra Edge Index, named for Ibbotson’s firm Zebra Capital and based on his research.
In two papers co-authored with Thomas Idzorek of Morningstar, Ibbotson has found that the most popular stocks—that is, those that are most frequently traded—have greater volatility and lower returns than their more obscure peers. In order to take advantage of this finding, the Zebra Edge Index assembles the largest stocks by capitalization, but removes those that are most popular. The index will be used to create investment products including, initially, an annuity offered by Nationwide.
Ibbotson’s visit to the NYSE Bell Podium on January 12 was just the latest milestone in a career that has been marked by a blending of academic research and an active professional life.
“All of my time at Yale, I’ve been a ‘professor in practice,’” he says. “That means I practice—I actually do something. For most of that time it was Ibbotson Associates, and more recently it was Zebra Capital. But I’ve always had a business involved in doing research.”
His research is informed by the latest thinking in finance, but is eminently practical. “I’ve always been an applied researcher,” he says. “My research has always been research that could be applied, and a lot of it does get applied.”
“It’s gratifying when people come to me all the time and say that my research has affected them in how they manage money and how they design their products.”
Just as Ibbotson’s research has shaped his career as an investor and advisor, his professional life has informed his research.
“There’s clearly a lot of synergy here, because you see things in the business world—what people need, how to communicate with them,” he says. “This feedback with them, back and forth, has been a wonderful environment. So I’ve been very fortunate over the years to essentially put two careers together and make them both work.”