Trend-Following Filters – Part 7
This article examines four digital filters commonly used for trend-following: moving average linear weighted moving average exponential smoothing time series momentum
Institutional Investing and Manager Forbearance
Forbearance is important and we argue that performance evaluation should be multifaceted, akin to a Bayesian decision-maker who conducts continued due diligence and updates beliefs about returns with process information.
How to Crush the CFPⓇ Exam 💪: Part 2
As discussed in Part 1 of this blog series, the Certified Financial Planner (CFPⓇ) exam can be a stressful and intimidating experience. With eight areas of content to cover – both as siloed financial knowledge and also as an integrated approach to building a comprehensive financial plan – it's important to be organized and intentional in your study efforts.
International Value Stocks Offering “More Bang for the Buck”
Over the very long term, while value stocks have been less profitable and have had slower growth in earnings than growth stocks, they have provided higher returns.
The democratization of investing and the evolution of ETFs
The implications of the competitive landscape for ETFs are mixed. On one hand, they have truly democratized investing. Investors now have access to the benefits of financial markets in one instrument that provides diversification at very low fees. Recently advertised fees on broad-based bond funds have fallen to 3bps. On the other hand, ETF providers have been able to satisfy investor demand for increasingly specialized products even though the evidence suggests they underperform. Are investors becoming worse off due to the effectiveness of the marketing strategies by providers of specialized ETFs?
ESG Preferences Negatively Affecting Market Efficiency
While ESG investors can express their values through their investments, they should expect lower returns from their portfolios—though they also will be taking less investment risk.
Geographic Investing and Company Operations
The article explores the limitations of traditional country-level stock market indexes that are constructed based on the domicile of issuing firms.
The Research and Development Factor
The higher returns to high R&D stocks represent compensation for heightened systematic risk not captured in standard asset pricing models.
A New Wolf in Town? Pump-and-Dump Manipulation in Cryptocurrency Markets
Cryptocurrency and the various forms of infrastructure are currently in a stage of rapid innovation. If the manipulation embedded in PADs is widespread then the confidence in and integrity of the crypto market will suffer.
The Role of ESG in Equity Returns Across Private, Primary, and Secondary Markets
The continued popularity of sustainable strategies could create sufficient cash flows to offset the risk premium in the lower-scoring stocks, at least until an equilibrium is reached.
How to Crush the CFPⓇ Exam 💪: Part 1
Let’s talk about the right approach(es) and the proper study techniques you need to pass the CFPⓇ exam with confidence and get the certification you need to advance your career in finance and investing.
Trend Following and Momentum Turning Points
Trend follower nerd alert: This study is important because it offers a comprehensive analysis of TS momentum strategies, its unifying framework that links performance to underlying variables, and its practical implications for investors seeking to enhance their understanding of momentum investing and improve their portfolio performance.
Implications of Regime-Shifting Stock-Bond Correlation
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.
Do Short-Term Factor Strategies Survive Transaction Costs?
Short term return anomalies are generally dismissed in the academic literature "because they seemingly do not survive after accounting for market frictions.” In this research, short term “factors” are taken seriously and the authors argue the standard parameters may not apply for short horizons.
Dissecting the Investment Factor
Investment predicts returns because, given expected profitability, high costs of capital imply low net present value of new capital and low investment, and low costs of capital imply high net present value of new capital and high investment.
The Determinants of Inflation
The findings from this Hidden Markov Model analysis provide policymakers with valuable insights into the nature and behavior of inflation regimes. This information can inform the design and implementation of monetary, fiscal, and regulatory policies to effectively manage inflation, stabilize the economy, and promote sustainable economic growth.
Structured Notes Are Financial Fairy Tales
Wall Street’s product machine is continuously pumping out fairy tales; structured products should be avoided.
The case for the tax-free conversion of SMAs into an ETF via Section 351
This piece outlines the high-level benefits of the ETF structure, which boils down to market access, tax efficiency, and transparency. It covers the considerations for a 351 tax-free conversion and the mechanics and tax consequences of a 351 conversion.
Evidence supporting factor-based seasonalities
Factor seasonality reflects its own stock-level equivalent. It is not an independent risk factor.
The Performance of Listed Private Equity
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.