DIY Trend-Following Allocations: December 2023
By Ryan Kirlin|December 1st, 2023|Index Updates, Research Insights, Tool Updates, Tactical Asset Allocation Research|
Full exposure to domestic equities. Full exposure to international equities. Partial exposure to REITs. No exposure to commodities. No exposure to intermediate-term bonds.
After-Tax Performance of Actively Managed Funds
By Larry Swedroe|December 1st, 2023|Larry Swedroe, Research Insights, Tax Efficient Investing|
Ignoring the impact of taxes on the returns of taxable accounts is one of the biggest mistakes that can be made.
![Source: Bloomberg’s John Authers and Isabelle Lee, Points of Return[/ref]](https://alphaarchitect.com/wp-content/uploads/2023/11/Real-Bond-Yields.jpg)
Is now a good time to buy bonds?
By Jonathan Seed|November 28th, 2023|Research Insights, Guest Posts, Fixed Income|
As pundits wrestle over the cause, implications, and sustainability of the recent massive moves in interest rates, I’ll instead delve into the two terms most often blamed for these shifts in rates: R-star and the Term Structure Premium. Unfortunately, what most want—a measure of them—is unknowable. But we can benefit from understanding the theories and models behind these terms. We can glean guidance on what we need, namely a better understanding of the risks and rewards of buying longer-maturing bonds at current rate levels. I contend that now is a good time to secure future cash flows by buying bonds, although determining the precise amount to invest remains a challenge.
A new twist on momentum strategies: Utilize overlapping momentum portfolios
By Tommi Johnsen, PhD|November 27th, 2023|Research Insights, Basilico and Johnsen, Academic Research Insight, Momentum Investing Research|
Momentum investors utilize different timeframes to identify high momentum equities: past 6, 9, 12 months as an example. Obviously, there is a significant degree of overlap in momentum stocks identified across various past time frames. However, there has been little research focused on understanding the characteristics of momentum stocks formed on six and 12 months that overlap one another. The authors refer to the subset as “overlapping” stocks and suggest they constitute the largest proportion of the profitability of the momentum strategy.
Focus on Income Can Undermine Returns: The Case of Covered Calls
By Larry Swedroe|November 24th, 2023|Volatility (e.g., VIX), Options, Larry Swedroe, Research Insights|
Covered calls implemented to deliver higher derivative income should be expected to have (1) lower total returns, (2) higher tax realizations along the path, and (3) a more negatively skewed return profile. Investors who allocate to these strategies for their income alone, without accounting for these other considerations, might have made a devil’s bargain
A New 1042 QRP Team Member Joins Alpha Architect: Erik Chavez
By Wesley Gray, PhD|November 22nd, 2023|Research Insights, Business Updates|
We are pleased to announce that Erik Chavez has joined Alpha Architect and will work alongside Kyle and Doug to support our 1042 QRP ESOP service (qualified replacement property for ESOP rollovers). While new to our team, Erik has been our friend for a long time. Erik is a multiple-time March for the Fallen survivor -- see below when he is part of the MFTF clean-up crew (cirled in blue).
Is ESG Investing Counterproductive?
By Elisabetta Basilico, PhD, CFA|November 20th, 2023|ESG, Research Insights, Basilico and Johnsen, Academic Research Insight, Corporate Governance|
The article introduces a concept called "impact elasticity," which measures how a firm's environmental impact changes in response to shifts in its cost of capital (the "E" in "ESG"). It finds that the dominant sustainable investing strategy, which favors green firms and punishes brown firms by altering their cost of capital, can be counterproductive.
The Magnificent Seven
By Larry Swedroe|November 17th, 2023|Research Insights, Larry Swedroe, Academic Research Insight, Value Investing Research, Size Investing Research|
When a small subset of companies makes up a large portion of a portfolio, for better or worse their returns will have a greater impact on overall portfolio results.
Is Inflation Ever Going to Go Down?
By Tommi Johnsen, PhD|November 13th, 2023|Inflation Investing, Research Insights, Basilico and Johnsen, Academic Research Insight|
If inflation surges, how long on average, will it take to subside to a reasonable target rate of 2%?
The Performance of Major Private Equity/LBO Firms
By Larry Swedroe|November 10th, 2023|Private Equity, Larry Swedroe|
The claims of superior risk-adjusted performance by the PE industry are exaggerated. Given their lack of liquidity, opaqueness, and greater use of leverage, it seems logical that investors should demand something like a 3-4% IRR premium. Yet, there is no evidence that the industry overall has been able to deliver that.