A Framework for Creating Model Portfolios
Model Portfolios Basu, Gates, Karir and AngJournal of Wealth Management, Spring 2019A version of the paper can be found here Want to read our summaries [...]
The Perils (and Inevitability) of Forecasting
I recently experienced one of those fortunate confluence of events that helped me better grasp the relationship between forecasting (which I feel is futile) and [...]
Market Sell-off Analysis: Baseline Historical Facts
We often hear that the market is 5% off its highs or that it is down 5% from the high of the year. This alone [...]
Volatility Targeting Improves Risk-Adjusted Returns
There’s a large body of research, including the 2017 study “Tail Risk Mitigation with Managed Volatility Strategies” by Anna Dreyer and Stefan Hubrich, that demonstrates [...]
Buyer Beware: The Reality of Tax-Loss Harvesting Benefits
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 [...]
Investment Strategy in an Uncertain World
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 [...]
Sector Business Cycle Analysis
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 [...]
Using Flexible Spending to Achieve Financial Goals
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., [...]
Rebalancing…Not so Fast
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 [...]
The Smart Money Indicator: A New Risk Management Tool
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 [...]
Warren Buffett is Wrong About Options (Except)
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 [...]
Asset Diversification in a Flat World
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 [...]
Investment Factor Timing: Challenging, but Not Impossible
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 [...]
Summing up the Potential Benefits and Pitfalls of Diversification in 3 Slides
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 [...]
When Diversification Fails
When Diversification Fails Sebastien Page and Robert PanarielloFinancial Analyst Journal, forthcomingA version of this paper can be found hereWant to read our summaries of academic finance [...]
A Q&A Discussion with Vanguard Researchers on the “Fair Value CAPE Ratio”
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 [...]
A Smarter CAPE Ratio to Better Forecast Expected Stock Returns
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 [...]
Market Volatility? Hang On and Enjoy the Ride
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 [...]
Are Trend-Following and Time-Series Momentum Research Results Robust?
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 [...]
The World’s Longest Multi-Asset Momentum Investing Backtest!
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 [...]