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The Best Strategies for Dealing with Inflation? Factors and Trend-Following

By |January 24th, 2022|Research Insights, Factor Investing, Trend Following, Basilico and Johnsen, Academic Research Insight, Tactical Asset Allocation Research|

Inflation -- what's that? ... It has been quite a while since inflation has been considered a problem. Today, however, the angst surrounding the possibility of a resurgence in inflation is real and “top of mind” for investors.   If the current fear becomes a reality, how should investors react? What strategies and asset classes perform well in a rising inflationary environment? If inflation does resurge beyond a temporary phase, how should investors restructure or reposition their portfolios? The purpose of this article is to provide context for those decisions.

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Important Insights Into Index Versus Active ETF Management

By |January 20th, 2022|ETF Operations, Research Insights, ETF Investing|

can be boiled down to the following: Index ETFs come with increased transparency and marketability; Active ETFs come with lower operational costs and increased portfolio management flexibility.

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Empowering Investors Through Education Actually Works!

By |January 18th, 2022|Research Insights, Basilico and Johnsen, Academic Research Insight, Behavioral Finance|

Empowering investors through education is a foundational tenet of our firm and a big reason why we write these posts. The article we cover here is a meta-analysis 76 randomized studies on the impacts and design of financial education, a topic we've hit on before. It' almost cliche now to hear parents and educators demand schools take the initiative to make financial education a high priority. However, it's reasonable to ask, does financial education even work?

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Factor Investing in Sovereign Bond Markets

By |January 13th, 2022|Research Insights, Factor Investing, Larry Swedroe, Academic Research Insight, Fixed Income, Value Investing Research, Momentum Investing Research|

The reported results we covered have important implications for investors in terms of portfolio construction, risk monitoring, and manager selection. Because these common factors explain almost all the returns of bond portfolios, investors should construct their bond portfolios using low-cost, passively (systematically) managed funds with these factors in mind and then carefully monitor their exposure to these systematic risks.

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Trend-Following Filters – Part 4

By |January 11th, 2022|Research Insights, Trend Following, Guest Posts|

This article considers a different type of filter called the Kalman filter. The Kalman filter is a statistics-based algorithm used to perform the estimation of random processes. Our research will explain what Kalman Filters are and utilize them with financial time series data for trend following purposes.

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Asset Allocation and Private Market (i.e. illiquid) Investing

By |January 10th, 2022|Private Equity, Liquidity Factor, Research Insights, Factor Investing, Basilico and Johnsen, Academic Research Insight, Tactical Asset Allocation Research|

Allocations to illiquid assets have become increasingly popular requiring asset managers to consider portfolio-wide liquidity characteristics. Although determining the price of illiquidity is a challenge for investors, the construction of a portfolio that includes liquidity constraints can be even more daunting. How do we optimize asset allocation with liquidity as a significant constraint on the portfolio?

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Should I launch an Active ETF or an Index ETF?

By |January 7th, 2022|ETF Operations, Research Insights, ETF Investing|

summary, there are no right answers when it comes to launching an active or an index ETF. However, by understanding the basics of the regulatory landscape and the costs/benefits of each approach, both consumers and ETF operators can make more informed decisions. Thanks for reading!

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What Do Mutual Fund Investors Really Care About?

By |January 6th, 2022|Research Insights, Larry Swedroe, Academic Research Insight, Behavioral Finance, ETF Investing|

Are individuals just naïve performance chasers, unaware of the financial literature, or are they sophisticated investors? Pretty much.

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DIY Asset Allocation Weights: January 2022

By |January 3rd, 2022|Index Updates, Research Insights, Tool Updates, Tactical Asset Allocation Research|

Current Exposures:

  • Full exposure to domestic equities.
  • Full exposure to international equities.
  • Full exposure to REITs.
  • Full exposure to commodities.
  • No exposure to intermediate-term bonds.
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Interesting Insights into How Endowments Invest

By |January 3rd, 2022|Research Insights, Basilico and Johnsen, Academic Research Insight, Tactical Asset Allocation Research|

Despite their popularity and the ease of access to university-based endowments, there is little in the academic literature about the history of endowment investing. In this article, the authors aim at filling this gap.

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Understanding Momentum Investing

By |December 30th, 2021|Research Insights, Factor Investing, Larry Swedroe, Academic Research Insight, Momentum Investing Research|

The main takeaway for investors is that Kelly, Moskowitz, and Pruitt demonstrated that past return characteristics are strongly predictive of a stock’s realized exposures to common risk factors, providing direct evidence that price trend strategies are in part explainable as compensation for common factor exposures—past returns predict betas on factors and those factors have high average returns.

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The Illiquidity Discount is an Opportunity Cost

By |December 28th, 2021|Liquidity Factor, Research Insights, Factor Investing, Basilico and Johnsen, Academic Research Insight|

Private investment opportunities seem to have been filling investors' portfolios. These investment vehicles come with a discount to the assets value to pay investors for taking on illiquidity risk. Readers of this article are treated to the development of a theory and a practical model that quantifies the illiquidity discount.

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Do Mutual Funds Increase Disclosure Complexity to Hide Fees?

By |December 22nd, 2021|Financial Planning, Research Insights, Basilico and Johnsen, Academic Research Insight, Behavioral Finance, Corporate Governance|

Do mutual funds create unnecessarily complex disclosures and fee structures to obfuscate weak net performance? Yes.

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Value investing: What history says about five-year periods after valuation peaks

By |December 21st, 2021|Research Insights, Factor Investing, Value Investing Research, Tactical Asset Allocation Research|

Value stocks are historically cheap compared to the past. Given this fact, a natural question is the following, "After the last two times Value had a "peak" of the factor being cheap, how did it do the subsequent five years?"

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What percentage of COO/CCO/CTOs in Finance are Women?

By |December 17th, 2021|Research Insights, Women in Finance Know Stuff, Basilico and Johnsen, Academic Research Insight|

This is the second article in a series on women in leadership roles. To dig deeper into where women are in finance we analyzed 36,499 functional positions for the COO, CCO, and CTO roles in 29 countries, including 25 developed markets and Brazil, Russia, India, China (the “BRICs”). All public and private firms in the finance industry were included regardless of market capitalization or other characteristics.

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The Relationship Between the Value Premium and Interest Rates

By |December 16th, 2021|Research Insights, Factor Investing, Larry Swedroe, Academic Research Insight, Value Investing Research, Tactical Asset Allocation Research|

We've been suffering through the deepest and longest drawdown in values history. Looking for a scapegoat to explain the lackluster performance many have pointed to low interest rates as the root cause of the underperformance. The question is have interest rates impacted value in the past?

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ESG Investing: Dissecting Green Returns

By |December 13th, 2021|ESG, Research Insights, Basilico and Johnsen, Academic Research Insight, Value Investing Research, Momentum Investing Research|

In theory green stocks should have lower expected returns, this however, is not what we've seen. So the question is what has caused the outperformance of green stocks? And has that outperformance cost value investors their returns?

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Does the Market Efficiently Price the Value of Brands?

By |December 9th, 2021|Intangibles, Research Insights, Factor Investing, Larry Swedroe|

Despite the fact that a company’s internally generated intangible investments create future value, under current U.S. generally accepted accounting principles, internally developed intangibles are not included in reported assets. While research and development is an important intangible asset, so too is branding. Omission of an increasingly important class of assets reduces the usefulness and relevance of financial statement analysis that uses book value. 

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