U.S. Companies Have Outperformed Japanese Companies, or Have They?
By Larry Swedroe|June 28th, 2024|Empirical Methods, Research Insights, Larry Swedroe, Guest Posts, Other Insights, Value Investing Research|
While both the S&P 500 and the Nikkei indices have recently hit all-time highs, the valuation and balance sheet data we have reviewed indicate that the downside risks in Japanese stocks appear to be far less than the risks in U.S. stocks. Evidence such as this helps explain why legendary investor Warren Buffett has been buying Japanese stocks.
Creating Better Factor Portfolio via AI
By Tommi Johnsen, PhD|June 24th, 2024|Empirical Methods, Transaction Costs, Factor Investing, Research Insights, Basilico and Johnsen, Academic Research Insight, AI and Machine Learning|
Trading costs, discontinuous trading, missed trades, and other frictions, along with asset management fees can cause a shortfall between live and paper portfolios. The focus of this paper is to test an effective rebalancing method that prioritizes trades with the strongest signals to capture more of the factor premia while reducing turnover and trading costs.
When Shorts Don’t Short
By Larry Swedroe|June 21st, 2024|Short Selling, Larry Swedroe, Research Insights, Other Insights, Behavioral Finance, Momentum Investing Research|
Low short positions come from positive public news, while negative news can drive average short or extremely high short positions
How to Track Retail Investor Activity in TAQ
By Elisabetta Basilico, PhD, CFA|June 17th, 2024|Research Insights, Basilico and Johnsen, Academic Research Insight, Other Insights, Behavioral Finance|
This paper explores the effectiveness of the BJZZ algorithm, developed by Boehmer, Jones, Zhang, and Zhang (2021), in identifying and signing retail trades executed off exchanges with subpenny price improvements.
Private Equity May Not Be the Diversifier We Think (Due to Volatility Laundering), But Private Credit Could Be
By Larry Swedroe|June 14th, 2024|Private Equity, Larry Swedroe, Research Insights, Other Insights|
Volatility laundering causes the risk-adjusted returns and the diversification benefits of private equity to be significantly overstated. However, the problem of volatility laundering is not a problem for all private investments, specifically not for high-quality, floating rate, private credit.
Complexity is a virtue in return prediction
By Tommi Johnsen, PhD|June 11th, 2024|Empirical Methods, Research Insights, Basilico and Johnsen, Academic Research Insight, AI and Machine Learning|
Simple models severely understate return predictability compared to “complex” models in which the number of parameters exceeds the number of observations.
The Halo Effect Drives Demand for Sustainable and Impact Investments
By Larry Swedroe|June 7th, 2024|ESG, Larry Swedroe, Research Insights, Other Insights|
Both investment motives and investment experience are important determinants for investors’ ability to assess (impact) investment opportunities. While investor preference can justify accepting a lower return as the cost of expressing their values, the halo effect should not play a role in making that assessment—both economic theory and empirical evidence should lead investors to expect lower returns on sustainable investments.
Global Factor Performance: June 2024
By Wesley Gray, PhD|June 6th, 2024|Index Updates, Factor Investing, Research Insights, Tool Updates, Tactical Asset Allocation Research|
The following factor performance modules have been updated on our Index website.
DIY Trend-Following Allocations: June 2024
By Ryan Kirlin|June 3rd, 2024|Index Updates, Research Insights, Tool Updates, Tactical Asset Allocation Research|
Do-It-Yourself trend-following asset allocation weights for the Robust Asset Allocation [...]
Financial literacy in Canada: Not Bad, Eh?
By Elisabetta Basilico, PhD, CFA|June 3rd, 2024|Research Insights, Basilico and Johnsen, Academic Research Insight, Other Insights, Behavioral Finance|
This study is important because it provides valuable insights into the current state of financial literacy in Canada, its relationship to retirement planning, and the factors that influence financial literacy outcomes.