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.
Quality, Factor Momentum, and the Cross-Section of Returns
By Larry Swedroe|May 31st, 2024|Quality Investing, Factor Investing, Research Insights|
There is strong empirical evidence demonstrating that momentum (both cross-sectional and time-series) provides information on the cross-section of returns of many risk assets and has generated alpha relative to existing asset pricing models. Ma, Yang, and Ye’s findings provide another test of both robustness and pervasiveness, increasing our confidence that the findings of momentum in asset prices are not a result of data mining.
Does Diversity add value to asset management?
By Tommi Johnsen, PhD|May 28th, 2024|ESG, Research Insights, Basilico and Johnsen, Academic Research Insight, Behavioral Finance, Corporate Governance|
The research literature on diversity in asset management, while promising, is limited with respect to the breadth of the evidence produced to date. We don't really understand the broad-based benefits of diversity nor how diversity delivers value in asset management. How does it really work? Is it the university, the college major, gender, race, the work experience? That is where this study comes into play. The authors propose a unifying concept called homophily to analyze the impact of diversity in asset management using hedge funds as their laboratory. Sociology describes homophily as groups of people that share common characteristics such as beliefs, values, education, and so on. In a team setting those characteristics make communication and relationship formation easier. Further, a large body of research in sociology specifically documents the presence of homophily with respect to education, occupation, gender, and race. Luckily, management teams within hedge funds can be characterized by just those dimensions.
Momentum Everywhere, Even Cross-Country Factor Momentum
By Larry Swedroe|May 24th, 2024|Larry Swedroe, Factor Investing, Research Insights, Other Insights, Momentum Investing Research|
There is strong empirical evidence demonstrating that momentum (both cross-sectional and time-series) provides information on the cross-section of returns of many risk assets and has generated alpha relative to existing asset pricing models.
Postpandemic Inflation in Eleven Economies
By Elisabetta Basilico, PhD, CFA|May 20th, 2024|Research Insights, Basilico and Johnsen, Academic Research Insight, Other Insights, Macroeconomics Research|
This paper explores the applicability of the Bernanke-Blanchard (BB) model across diverse economies, revealing commonalities and differences in inflation dynamics post-pandemic.
Social Media: The Value of Seeking Alpha’s Recommendations
By Larry Swedroe|May 17th, 2024|Larry Swedroe, Research Insights, Guest Posts, Behavioral Finance, Active and Passive Investing|
The finding that the recommendations from SA articles resulted in statistically significant risk-adjusted alphas (returns unexplained by conventional academic models using factors such as the market, size, value, momentum, profitability, and quality for equity portfolios) is surprising given that the empirical evidence shows how difficult it is for institutional investors such as mutual funds to show outperformance beyond the randomly expected (as can be seen in the annual SPIVA Scorecards) because of market efficiency.
How Volatility and Turnover Affect Return Reversals
By Tommi Johnsen, PhD|May 13th, 2024|Volatility (e.g., VIX), Transaction Costs, Liquidity Factor, Research Insights, Factor Investing, Basilico and Johnsen, Academic Research Insight, Momentum Investing Research|
Higher volatility is associated with faster, initially stronger reversals, while lower turnover is associated with more persistent, ultimately stronger reversals
Using Machine Learning Programs to Forecast the Equity Risk Premium
By Larry Swedroe|May 10th, 2024|Research Insights, Larry Swedroe, Factor Investing, Guest Posts, AI and Machine Learning, Other Insights, Macroeconomics Research|
To date, the best metric we have for forecasting future equity returns and the ERP is current valuations. An interesting question is whether more complicated methods using newly developed machine learning models can provide superior forecasts.
Global Factor Performance: May 2024
By Wesley Gray, PhD|May 7th, 2024|Index Updates, Research Insights, Factor Investing, Tool Updates, Tactical Asset Allocation Research|
The following factor performance modules have been updated on our Index website.