Active and Passive Investing

///Active and Passive Investing

ETF Product Development: Past, Present, and Future

By | 2017-10-04T11:09:41+00:00 October 4th, 2017|Factor Investing, Active and Passive Investing, $mtum, ETF Investing|

On October 1st, 1908 Henry Ford introduced the Model T to the world. The power of the Model T was that it democratized the automobile so the average working-class person could afford a car for [...]

Assessing the Potential Market Impact of Passive, Short-volatility, and Low-volatility Strategies

By | 2017-09-29T11:59:50+00:00 September 29th, 2017|Research Insights, Guest Posts, Active and Passive Investing, ETF Investing|

The market has recently experienced record low levels of realized volatility and the VIX™ (volatility index) has fallen to historic lows. Moreover, the incredibly popular FAAMG stocks[ref]FAAMG is an abbreviation referring to the stocks of [...]

Active Share: Does it Predict Fund Performance?

By | 2017-08-18T17:10:54+00:00 June 15th, 2017|Factor Investing, Larry Swedroe, Active and Passive Investing|

The Holy Grail for mutual fund investors is the ability to identify in advance, which of the active mutual funds (or ETFs nowadays) will outperform in the future. The evidence suggests this task is almost [...]

“Passive” Investing: Theory and Practice in a Global Market

By | 2017-08-18T17:11:58+00:00 June 14th, 2017|Guest Posts, Active and Passive Investing|

Purely passive investing is theoretically plausible, but practically impossible. That said, the practical implementations can often be "good enough." As a theoretical index investor, you deploy capital, take a long snooze, and wake up some day [...]

Trust, but Verify: The Potential Problems of Blind Investing

By | 2017-08-18T16:54:18+00:00 May 25th, 2017|Guest Posts, Active and Passive Investing|

Nobody can predict the future, but there is a chance the blind purchase of broad-index portfolios will come to an abrupt and potentially chaotic end when the music finally stops. This argument is the thesis of this blog post. [...]

Chinese Market Anomalies – The Factor Killer?

By | 2017-08-18T17:08:10+00:00 May 12th, 2017|Value Investing Research, Momentum Investing Research, Size Investing Research, Active and Passive Investing|

The Oracle of Omaha just commented on the Chinese stock market in this year's Berkshire's annual meeting: ...Markets have a casino characteristic that has a lot of appeal to people, particularly when they see people [...]

Rebalance Your Portfolio? You are a Market Timer and Here’s What to Consider

By | 2017-08-18T16:58:05+00:00 March 23rd, 2017|Research Insights, Guest Posts, Tactical Asset Allocation Research, Active and Passive Investing|

In this piece I examine various way in which an investor can think about their active market timing decisions, often labeled with the innocuous term "rebalancing." Rebalancing a portfolio is the finance version of "eat [...]

Active Managers Should Love Passive Investing–It Makes Them Better!

By | 2017-08-18T17:10:55+00:00 February 27th, 2017|Basilico, Research Insights, Active and Passive Investing|

Blaming the disappointing performance of active management on the exponential growth of passive indexing (defined here) is not a new idea. However, a recently published paper in the Journal of Financial Economics,(3) provides a new and notable take on the continuing debate. In a surprising turnabout to Mr. Odey’s comment, the authors of the article find that actively managed funds are more “active”, charge lower fees, and produce higher alpha, when faced with more competitive pressure from low-cost passive index funds.

Active Versus Passive Investing: Can we End the Confusion?

By | 2017-08-18T17:10:52+00:00 February 24th, 2017|Research Insights, Investor Education, Active and Passive Investing|

I've noticed something profound the past few years: depending on your audience, the definition of active investing and passive investing is different. To a financial journalist, active means "human stock-picker," and passive means "computer stock-picker." [...]

Greatest Stock Picker of All Time: Buffett or Lynch?

By | 2017-08-18T17:04:29+00:00 February 8th, 2017|Factor Investing, Guest Posts, Active and Passive Investing|

Who is the greatest stock picker of all time? Many investors knee-jerk reaction is Warren Buffett. Understandable response, but is that the answer? Maybe not... So who is the greatest investor of all time? A few years [...]

Active Versus Passive for the US and the Canadian Markets

By | 2017-08-18T17:10:53+00:00 February 7th, 2017|Behavioral Finance, Active and Passive Investing, ETF Investing|

We all hear about the massive move away from active to passive in the US market. We also hear arguments that passive may eat the world and that active management is a zero sum game [...]

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 [...]

Active Fee Over Time: Retail and Institutional Trends Over Time

By | 2017-08-18T17:10:55+00:00 November 29th, 2016|Research Insights, Active and Passive Investing|

We've been focused on understanding how to communicate the concept of active fee to the broader investment community. Active fee is an important concept because it helps investors make more informed and educated decisions -- a [...]

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 [...]

The Expensive Lesson of Closet Indexing: Avoid Low Active Share and High Expenses

By | 2017-08-18T16:55:38+00:00 September 13th, 2016|Research Insights, Active and Passive Investing|

The promise of active investing is compelling: the opportunity to earn higher risk-adjusted returns! And paying a fee to an active manager--who is doing something unique--can make sense. And as we know, the only way to beat a benchmark [...]

How Portfolio Construction Affects Value Funds

By | 2017-08-18T17:03:34+00:00 May 13th, 2016|Value Investing Research, Active and Passive Investing|

Value investing is an investment philosophy that has been extensively discussed and examined at least since the days of Ben Graham, who popularized it as a discipline in the 20s and 30s. While there are [...]

How Portfolio Construction Affects Momentum Funds

By | 2017-08-18T17:03:35+00:00 November 16th, 2015|Momentum Investing Research, Active and Passive Investing|

We have already documented the returns to generic momentum investing strategies. Within the fund marketplace, many investors focus on fees and less on process. For example, Morningstar highlights the fees as "cost-efficient" for a specific momentum fund, MTUM.  However, fees are [...]

How to Pick Smart Beta ETFs

By | 2017-08-18T17:03:18+00:00 October 24th, 2015|Research Insights, Key Research, Tactical Asset Allocation Research, Active and Passive Investing|

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?

Is Passive Perfect? High Active Share Long-Term Investing Works Better

By | 2017-08-18T17:01:40+00:00 April 30th, 2015|Research Insights, Value Investing Research, Active and Passive Investing, $iwd|

Patient Capital Outperformance Cremers and Pareek A version of the paper can be found here. Want a summary of academic papers with alpha? Check out our Academic Research Recap Category. Abstract: This paper documents that among high [...]