Larry Swedroe

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The Investment Factor and Expected Returns

By |2019-11-15T23:14:56-05:00November 14th, 2019|Research Insights, Factor Investing, Larry Swedroe, Academic Research Insight|

Editor's note: Earlier this week, Lu Zhang discussed his thoughts on the investment factor and expected returns. In this piece, Larry discusses a recent research piece that tells a different side of the story. We [...]

What Returns Should Investors Expect from Private Equity

By |2019-11-05T11:11:10-05:00November 7th, 2019|Research Insights, Larry Swedroe, Behavioral Finance|

The collapse in interest rates, combined with historically high valuations (at least for U.S. stocks), have led many endowments, pension plans (especially those with large unfunded liabilities) and high net worth investors (such as those [...]

Can We Explain the Low Volatility Anomaly?

By |2019-08-22T09:12:16-05:00August 29th, 2019|Research Insights, Factor Investing, Larry Swedroe, Academic Research Insight, Low Volatility Investing, Active and Passive Investing|

One of the big problems for the first formal asset pricing model developed by financial economists, the CAPM, was that it predicts a positive relation between risk and return. But empirical studies have found the [...]

Structured Notes: The Exploitation of Retail Investors

By |2019-08-21T09:08:57-05:00August 22nd, 2019|Research Insights, Larry Swedroe, Investment Advisor Education, Active and Passive Investing|

One of the most well known and most beloved forms of literature is the fairy tale. Although most fairy tales are not about fairies, they are fictitious and highly fanciful tales of legendary deeds and [...]

The Variance Risk Premium is Pervasive

By |2019-08-09T14:35:45-05:00August 15th, 2019|Research Insights, Factor Investing, Larry Swedroe|

The variance risk premium (VRP) refers to the fact that, over time, the option-implied volatility has tended to exceed the realized volatility of the same underlying asset. This has created a profit opportunity for volatility [...]

Strategies to Reduce Crash Risk in Stocks

By |2019-07-12T13:15:49-05:00July 16th, 2019|Research Insights, Larry Swedroe|

Because equities are much riskier than high-quality bonds, the vast majority of the risk of a conventional 60 percent equity/40 percent bond portfolio is equity risk. Here’s the simple math demonstrating the point. Well-diversified equity [...]

Enhancing the Performance of Momentum Strategies

By |2019-07-12T10:42:25-05:00July 12th, 2019|Research Insights, Factor Investing, Larry Swedroe, Momentum Investing Research|

In “Your Complete Guide to Factor-Based Investing,” Andy Berkin and I presented the evidence demonstrating that momentum, both cross-sectional (or relative) momentum and time-series (or absolute, trend following) momentum, not only increases the explanatory power [...]

Is Active Management Skilled? If So, Who Benefits?

By |2019-06-27T10:47:59-05:00June 28th, 2019|Research Insights, Larry Swedroe, Active and Passive Investing|

According to Christian mythology, the Holy Grail was the dish, plate or cup with miraculous powers that were used by Jesus at the Last Supper. Legend has it that the Grail was sent to Great [...]

The Curse of Popularity

By |2019-06-20T08:28:54-05:00June 20th, 2019|Research Insights, Larry Swedroe, Academic Research Insight, Behavioral Finance|

We can define popularity as the condition of being admired, sought after, well-known, and/or accepted. One would think popularity is a good thing. However, when it comes to investing, the research shows that along with [...]

Does Leverage Explain the Investment Premium?

By |2019-06-10T14:46:53-05:00June 13th, 2019|Research Insights, Factor Investing, Larry Swedroe, Other Insights|

Research demonstrates that the investment factor has explanatory power for the cross-section of stock returns, with high-investment firms tending to underperform low-investment firms. For example, Kewei Hou, Chen Xue and Lu Zhang, authors of the [...]

Volatility Targeting Improves Risk-Adjusted Returns

By |2019-05-21T13:18:18-05:00May 22nd, 2019|Research Insights, Larry Swedroe, Other Insights, Low Volatility Investing, Tactical Asset Allocation Research|

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 that, while past returns do not predict future returns, past [...]

Volatility Anomalies: IVOL and Vol-of-Vol

By |2019-05-21T11:53:51-05:00May 21st, 2019|Research Insights, Factor Investing, Larry Swedroe, Low Volatility Investing|

Two of the more interesting puzzles in finance are related to volatility—stocks with greater idiosyncratic volatility (IVOL) have produced lower returns and stocks with high uncertainty about risk, as measured by the volatility of expected [...]

Deep Dive into the Value Factor

By |2019-04-30T09:25:03-05:00May 2nd, 2019|Research Insights, Factor Investing, Larry Swedroe, Value Investing Research|

The financial equivalent of the famous Miller Lite, “tastes great, less filling” debate is the debate between traditional financial economics which uses risk theories to explain asset pricing and the newer behavioral finance field that [...]

Investment Strategy in an Uncertain World

By |2019-04-02T08:28:43-05:00April 11th, 2019|Research Insights, Larry Swedroe, Academic Research Insight, Tactical Asset Allocation Research|

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 [...]

The Momentum of News

By |2019-04-02T08:12:09-05:00April 4th, 2019|Research Insights, Larry Swedroe, Momentum Investing Research|

Since the development of the capital asset pricing model (CAPM) in the 1960s, hundreds of anomalies (what John Cochrane famously called a “zoo of new factors”) have been uncovered in the cross-section of stock returns. [...]

Why the Size Premium Should Persist

By |2019-03-19T14:08:06-05:00March 20th, 2019|Research Insights, Factor Investing, Larry Swedroe, Size Investing Research|

As the chief research officer for Buckingham Strategic Wealth and The BAM Alliance, I’m often asked, after any asset class or factor experiences a period of poor performance, if the historical outperformance of stocks with [...]

“The Failure of Factor Investing was Predictable”

By |2019-02-04T13:02:58-05:00January 28th, 2019|Research Insights, Factor Investing, Larry Swedroe|

In a recent ETF column, Allan Roth listed five investment lessons. While I agreed with much of what he wrote, one claim—factor investing has “failed miserably”— called for examination of the facts. But first, a [...]

Discipline: A Necessary Condition for Successful Investing

By |2018-12-31T11:41:58-05:00December 31st, 2018|Research Insights, Larry Swedroe, Guest Posts, Behavioral Finance|

A good friend, Sherman Doll, related the following story. Sherman has been a two-line sport kite flier for years. While not a pro, he has learned a few tricks from observing the flying behavior of [...]

Is Active Alpha Enough to Cover Taxes?

By |2019-01-04T10:41:33-05:00December 26th, 2018|Research Insights, Larry Swedroe, Tax Efficient Investing|

Each time S&P Dow Jones Indices publishes its latest Active Versus Passive Scorecard, the persistent failure of the vast majority of actively managed funds to outperform is highlighted. The evidence on this failure led Charles [...]

How a Multi-factor Portfolio is Constructed Matters

By |2018-10-10T10:27:23-05:00October 11th, 2018|Research Insights, Factor Investing, Larry Swedroe|

The CAPM was the first formal asset-pricing model. Market beta was its sole factor. With the 1992 publication of their paper, “The Cross-Section of Expected Stock Returns,” Eugene Fama and Kenneth French introduced a new-and-improved [...]