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 [...]
There is a new paper published in the Journal of Financial Markets that digs a bit deeper into the Moskowitz, Ooi, and Pedersen "Time Series [...]
In my two previous blog posts (here and here), I analyze the performance of bonds during really bad months for US stocks (“Crisis Alpha” months), [...]
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 [...]
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 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 [...]
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 [...]
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. [...]
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 [...]
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 [...]
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 [...]
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 Moss, Clare, Thomas and Seaton A version of the paper can be found here. Want a summary of [...]
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 [...]
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, [...]
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.
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?
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 [...]
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, [...]
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 [...]
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