Larry Swedroe

Implications of Regime-Shifting Stock-Bond Correlation

By |September 8th, 2023|Larry Swedroe, Research Insights, Academic Research Insight, Tactical Asset Allocation Research|

The correlation between stocks and bonds should be a critical component of any asset allocation decision, as it impacts not only the overall risk of a diversified multi-asset class portfolio but also the risk premia one should expect to receive for taking risk in different asset classes. The problem for investors is that the correlation between stocks and bonds fluctuates extensively across time and economic regimes.

The Performance of Listed Private Equity

By |August 18th, 2023|Private Equity, Research Insights, Larry Swedroe|

It is important to diversify the risks of private equity. This is best achieved by investing indirectly through a private equity fund rather than through direct investments in individual companies. Because most such funds typically limit their investments to a relatively small number, it is also prudent to diversify by investing in more than one fund. Unfortunately, the evidence we reviewed suggests that diversifying by investing in LPEs is not an effective strategy. And finally, top-notch funds are likely closed to most individual investors.

The Quality Factor and the Low-Beta Anomaly

By |August 4th, 2023|Research Insights, Factor Investing, Larry Swedroe, Low Volatility Investing|

The empirical evidence demonstrates that returns to the low-beta anomaly are well explained by exposure to other common factors, and it has only justified investment when low-beta stocks were in the value regime, after periods of strong market and small-cap stock performance, and when they excluded high-beta stocks that had low short interest.

Reducing the Risk of Momentum Crashes

By |July 21st, 2023|Factor Investing, Larry Swedroe, Research Insights, Momentum Investing Research|

The empirical research demonstrates that, on average, investing in previous winners and short selling previous losers offers highly significant returns that other common risk factors cannot explain. However, momentum also displays huge tail risk, as there are short but persistent periods of highly negative returns. Crashes occur particularly in reversals from bear markets when the momentum portfolio displays a negative market beta and momentum volatility is high.

And the Winner Is: Examining Alternative Value Metrics

By |July 7th, 2023|Research Insights, Factor Investing, Larry Swedroe, Value Investing Research|

Although the most efficient way to implement a value strategy may need to be clarified, it is clear that value has withstood the test of time and that some implementations are superior to others. The evidence suggests that P/B is not an efficient metric as a standalone criteria. Instead, value strategies that use P/B should include at least a measure of profitability while managing sector - and security-level diversification.

Improving Performance by Avoiding Negatives of Index Replication

By |June 16th, 2023|Index Updates, Price Pressure Factor, Research Insights, Larry Swedroe, Guest Posts, Investor Education|

There are several significant, well-documented benefits of index funds. In addition to outperforming a large majority of actively managed funds, they tend to have low fees, low turnover (resulting in low trading costs and high tax efficiency), broad diversification, high liquidity, and near-zero tracking error (generally assumed to mean that they incur negligible trading costs).

Merger Arbitrage as Diversification Strategy

By |April 14th, 2023|Event Driven Investing, Research Insights, Larry Swedroe|

Merger arbitrage is an investment style in which investors seek to buy shares of firms that are acquisition targets with the objective of realizing the difference between the amount for which the target is being acquired and the stock price of the target shortly after the acquisition is announced. The stock price of the target company typically sells below the acquisition price, reflecting the uncertainty of the deal being completed (the arbitrage spread). Betting on mergers is a classic hedge fund arbitrage strategy.

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