Executive Summary • Tax loss harvesting is widely promoted, but we think the benefits are generally misunderstood and often overstated.[ref]a recent paper highlighted by Wes on twitter comes to a similar conclusion. Here is a [...]
In 1921, University of Chicago Professor Frank Knight wrote the classic book “Risk, Uncertainty, and Profit.” An article from the Library of Economics and Liberty described Knight’s definitions of risk and uncertainty as follows: Risk [...]
There are different investment approaches to identify sector winners and losers, such as price momentum strategies, top down approach based on specific macroeconomic indicators or bottom-up approaches to identify sectors with improving fundamentals. One widely [...]
Financial planning and specifically portfolio "safe" withdrawal rates are often viewed and analyzed from the perspective of rigid rules that can't be broken - i.e., you will take an inflation adjusted 4% of starting portfolio [...]
My last article used Warren Buffett’s pre-crisis sale of put options to highlight the risk of getting over our financial skis. In both temperament and negotiation, Warren can outlast most bear markets. Many of us [...]
We have all heard the mantra, “You can’t time the market!” But in reality, investors attempt to do just that every day as part of their tactical asset allocation strategies, which are less extreme variants [...]
Warren Buffett sold long-dated, deep out of the money puts in the years leading up to the financial crisis. In his 2008 Annual Letter to Shareholders, he explained: I believe each contract we own was [...]
Diversification is a fundamental principle of prudent investing due to its ability to mitigate/minimize risks. In fact, it has been called the only free lunch in investing because, done properly, it can reduce risk without [...]
The Promises and Pitfalls of Factor Timing Jennifer Bender, Xiaole Sun, Ric Thomas and Volodymyr Zdorovtsov Journal of Portfolio Management A version of this paper can be found here Want to read our summaries of academic [...]
Not long ago I used to teach investment management courses to Master's students (MBAs and MS Finance types). A core aspect of my course was so-called modern portfolio theory. We did a lot of math [...]
When Diversification Fails Sebastien Page and Robert Panariello Financial Analyst Journal, forthcoming A version of this paper can be found here Want to read our summaries of academic finance papers? Check out our Academic Research Insight category What [...]
As everyone who's been invested for the last ten years knows, post-financial crisis stock returns have been incredible. The chart below highlights the total returns for the S&P 500 Index, the MSCI EAFE Index, the [...]
Improving U.S. Stock Return Forecasts: A “Fair-Value” CAPE Approach Joseph Davis, Roger Aliaga-Diaz, Harshdeep Ahluwalia, and Ravi Tolani Journal of Portfolio Management A version of this paper can be found here Want to read our summaries [...]
As you are no doubt experiencing, stock market volatility has spiked this year with the S&P 500 dropping or rising 2% or more on eight different days. Jolts of this size didn't happen at all in [...]
When it comes to trend following and/or time-series momentum research, we got ya covered! A few places to dig in: Evidence for Long-Term Trend-Following by Alpha Architect World's Longest Trend-Following backtest by Alpha Architect Diversification Benefits of [...]
As evidenced by the image below, interest in momentum research has taken off since the original 1993 Jegadeesh and Titman paper: Source: "Two Centuries of Multi-Asset Momentum (Equities, Bonds, Currencies, Commodities, Sectors and Stocks)" [...]
Many people talk about the tax benefits of retirement accounts. However, few attempt to quantify and estimate the actual benefits. To make matters worse, when the topic is addressed, many of the discussions rely on [...]
Professors John Graham and Campbell Harvey consistently put out great research. One of their innovations in financial research is their annual CFO survey (we've covered this research here, here, and here, if interested). In their [...]
When stock prices reach a new high, investors start asking the question: Are stocks overvalued? To answer this question, investors have developed several alternative equity valuation models. Typically, each of these models compares the stock [...]
The academic research has generally found valuations, such as the earnings yield (E/P) (or the CAPE 10 earnings yield) and valuation spreads, have predictive value in terms of future returns. The higher the earnings yield, [...]
