Can Investors Replicate the Dorsey Wright Focus 5 ETF Strategy?
A long-time reader asked that we examine the performance and process associated with the Dorsey Wright Focus Five ETF (ticker: FV). For those who are unfamiliar [...]
Evidence-Based Investing Requires Less Religion and More Reason
Technical Analysis: The Market’s Oldest Religion During the 1600s, the Dutch had a large merchant fleet and the port city of Amsterdam was a dominant [...]
The Folly of Stock Market Forecasting
The idea that one can predict stock market movements is somewhat insane. The major problem with stock market forecasting is the lack of evidence that it [...]
Digging Deeper into Adaptive Asset Allocation
In some ways, investing is simple. After all, we all want the same things. High returns. Low volatility. Small max drawdowns. Unfortunately, it's very difficult--if [...]
The Moving Average Research King: Valeriy Zakamulin
Some weekend reading for trend-followers who want to question their beliefs. Valeriy Zakamulin is an animal when it comes to generating research on moving averages. [...]
Even God would get fired as an Active Investor
Perfect foresight has great returns, but gut-wrenching drawdowns. In other words, an active investor who was clairvoyant (i.e. "God"),[ref]We mean no offense by the use [...]
‘Tis the Season for strange effects in the stock market.
The efficient market hypothesis suggests that stock prices are always “right” in the sense that stock prices reflect all available information. Of course, during tax [...]
Expanding the Efficient Frontier with Value and Momentum Strategies
Awww...modern portfolio theory...that feel-good construct I teach to all of my graduate-level finance students each year. Simply input 1) a vector of expected returns and [...]
DIY Asset Allocation Weights: December 2015
Do-It-Yourself tactical asset allocation weights are posted. Create a free account here if you want to access the site directly. Sign in here if you already have a [...]
Trend Following and Momentum Strategies for Global REITs
Trend Following and Momentum Strategies for Global REITs Moss, Clare, Thomas and Seaton A version of the paper can be found here. Want a summary of [...]
Bond Performance when Interest Rates Spike
The prediction of higher interest rates has been ongoing since the government went all-in on a variety of so-called "inflationary" efforts. Inflation hasn't happened and rates are [...]
The World’s Longest Trend-Following Backtest
Were in the middle of an academic research project and we ran a simple long-term trend-following model from January 1, 1801 to September 30, 2015. Recently, [...]
Which Asset Allocation Weights Work the Best?
What is the optimal method to weigh an index? Everyone seems to have a story these days for the "best" way to weigh an index. In this study we look at simple ways to weigh a large-cap stock index using prices only. Bottom-line up front: Low volatility worked the best on a risk-adjusted basis over the past 87 years. However, low volatility, was close followed by momentum, equal-weighting, and value-weighting, respectively. Across the board, results are similar.
How to Pick Smart Beta ETFs
Investors are probably unaware of the price they are paying for the "active" piece of Smart Beta. Using a simple framework, we show that buying a Smart Beta product at 45bps is equivalent to paying 5bps for a generic passive exposure and 138.33 bps for the active exposure! How many investors are aware that "low-cost" smart beta products might be implicitly charging fees that are equivalent to many active mutual fund fees?
Daily Academic Alpha: Momentum Investing and Asset Allocation
The results in this paper won't surprise most who are regular readers, but the paper below does a nice job explaining things in a simple [...]
Commodity Investing 101: Basic Insights Most Advisors Don’t Know
Unlike equity and bond investing, investing in commodities is a less familiar undertaking for many. Commodities behave differently than stocks and bonds, pose different risks, [...]
How to Use Factor Funds in a Diversified Portfolio
Active management has been out of favor for a while--high fees, high tax burdens, and poor long-term performance. But with the slow rise of actively [...]
Combining volatility, momentum, and trend in asset allocation
The Effective Combination of Risk-Based Strategies with Momentum and Trend Following Gregory Guilmin A version of the paper can be found here. Want a summary of [...]
Global 60/40 versus Domestic 60/40
The Harvard Management Company report was recently released here. h.t. Tom for pointing out. The biggest surprise was the spread in returns between the global 60/40 [...]
Can Investors Achieve Commodity Exposure via Equities?
This past year we examined the possibility of replicating commodity exposure via equities. The project was spurred by an insightful research report from MSCI, which showed some [...]