Macroeconomics Research

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Can asset bubbles be mathematically quantified before they burst?

By | 2017-11-13T13:08:42+00:00 November 14th, 2017|Research Insights, Guest Posts, Low Volatility Investing, Macroeconomics Research|

The subject of asset bubbles and market crashes has fascinated me for more than 20 years. As an options market maker for Susquehanna International Group ("SIG"), extreme price movements were a daily source of concern. I [...]

Treasury Bills Outperform Most Stocks — Say What???

By | 2017-08-18T16:54:25+00:00 January 26th, 2017|Research Insights, $SPY, Active and Passive Investing, Macroeconomics Research|

Each morning we peruse a variety of research sites to see if there is anything exciting, new, and intriguing. Rarely does one find something that triggers a knee-jerk reaction like a recent paper by Hendrik [...]

Earth to Passive Investors: Lunch is Never Free.

By | 2017-08-18T17:05:54+00:00 November 7th, 2016|Uncategorized, Tactical Asset Allocation Research, Active and Passive Investing, Macroeconomics Research|

Imagine the following scenario: A strategy that outperforms everything. An ability to scale the strategy at no costs. A beating drum highlighting the infallible logic of the strategy. And the best part is this strategy [...]

Why a Stock Market Double Would Not be Weird

By | 2017-08-18T16:52:17+00:00 September 26th, 2016|Macroeconomics Research|

This morning we got a sad note from a famous former hedge fund manager (a friend of the firm who shall remain nameless): What if the [stock] returns are never positive again? Just a question from a [...]

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Tactical Asset Allocation: A Practitioner’s Defense of Return Predictability

By | 2017-08-18T16:56:17+00:00 September 22nd, 2016|Research Insights, Tactical Asset Allocation Research, Macroeconomics Research|

The prospect of being able to successfully anticipate and predict future market returns is irresistible to practitioners and academics alike, although success has proven elusive. Many have fallen short while seeking this "holy grail" of investing. [...]

Was the Financial Crisis Really a Valuation Crisis?

By | 2017-08-18T16:52:47+00:00 September 16th, 2016|Guest Posts, Macroeconomics Research|

Most people look back at the dot-com bubble and acknowledge valuations were elevated far above historical norms. Investors ignored historically useful fundamentals, such as earnings and book value, and started relying on measures like eyeballs and [...]

Asset Pricing with–and without–garbage.

By | 2017-08-18T17:09:57+00:00 August 12th, 2016|Uncategorized, Macroeconomics Research|

If you are into consumption-based asset pricing theory and the associated empirical attempts to reconcile the theory with the data from the realized equity premium, garbage is a fascinating subject. So let's talk about asset pricing both with--and [...]

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Will Bonds Deliver Crisis Alpha in the Next Crisis?

By | 2017-08-18T16:52:05+00:00 June 7th, 2016|Guest Posts, Macroeconomics Research|

Bonds are often viewed as being great diversifiers due to the perception that they perform well during tough times for stocks. Historically this has been a true statement. But will it continue? Our answer: unclear. Most [...]

A Remarkable View of China’s Official GDP — It’s Not What You Think

By | 2017-08-18T17:11:17+00:00 December 11th, 2015|Macroeconomics Research|

A few weeks ago, the WSJ announced that in the third quarter the growth rate of China’s economy had declined to 6.9% -- the lowest rate since the financial crisis. Perhaps predictably, economist naysayers immediately [...]

Turn Off Your Chief Economist: GDP Growth Doesn’t Predict Stock Returns

By | 2017-08-18T16:54:16+00:00 October 22nd, 2015|Macroeconomics Research|

In a sustained effort to try too hard, investors are constantly analyzing and assessing the growth rates of various markets around the world. The key assumption behind this analysis is that knowledge of these growth [...]

Sobering 10-Year Market Predictions from CFOs

By | 2017-08-18T16:56:49+00:00 June 15th, 2015|Tactical Asset Allocation Research, $SPY, Macroeconomics Research|

The Graham-Harvey survey is complete and the expectations of CFOs are available for review. As the figure below highlights, expected returns on the S&P 500 have been gradually decreasing over time. As of Q1 2015, [...]

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Global Debt: A Scary Situation with Limited Solutions

By | 2017-08-18T17:04:42+00:00 February 19th, 2015|$SPY, $IEF, Macroeconomics Research|

Earlier this month, McKinsey published a remarkable report on trends in global debt, and concludes that the world's debt, rather than decreasing,  is in fact increasing worldwide. So much for deleveraging. The report breaks down [...]

The Hated. The Feared. The Amazing. The US Treasury Bond.

By | 2017-08-18T16:55:33+00:00 January 2nd, 2015|Tactical Asset Allocation Research, Macroeconomics Research|

As "everyone" seems to know, the US 10-year Treasury bond has a low relative yield and is "inevitably going to rise at some point in the future." We have no strong feelings one way or [...]

Valuation Spreads Over Time: A Unique Market Timing Signal?

By | 2018-01-30T07:25:59+00:00 September 12th, 2014|Value Investing Research, Uncategorized, Tactical Asset Allocation Research, Macroeconomics Research|

The blogosphere is spammed with commentary related to the current high market valuations and the inevitable crash that "must" ensue. We've even been involved in the conversation at different points, trying to add some depth [...]

How to Build Expected Return Forecasting Models

By | 2017-08-18T17:03:28+00:00 July 14th, 2014|Research Insights, Key Research, Tactical Asset Allocation Research, Macroeconomics Research|

Investors are enamored with various investment houses and personalities who claim insight into the prospects for long-term expected market returns. Some classic examples include Nouriel Roubini, John Hussman, David Rosenberg, or Jeremy Grantham. All really smart people. But have you ever asked "How" these folks came to their conclusions? In most cases, the answer is probably "No" and the reason is because there is a lack of transparency from the author(s) and/or a lack of knowledge/understanding on behalf of the reader. We also want to highlight that one can develop incredibly complex return forecasting models -- super sexy, super interesting, super compelling, etc. -- but that still doesn't mean they are any good at forecasting much of anything.

Walmart delivers Low Prices…and High Home Prices

By | 2017-08-18T16:52:52+00:00 July 14th, 2014|Research Insights, Macroeconomics Research|

When Walmart Comes to Town: Always Low Housing Prices? Always? Devin Pope and Jaren Pope A version of the paper can be found here. Want a summary of academic papers with alpha? Check out our Academic Research [...]