The (Un-)Importance of Returns
In my last job with a large investment bank I built two global research teams and worked with high-profile clients around the globe. Having left [...]
How Asset Managers Are Adapting to Exchange-Traded-Funds
The ETF industry has been around for over 20 years at this point, but over the past 5 years the ETF industry has captivated the [...]
Rebalance Your Portfolio? You are a Market Timer and Here’s What to Consider
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 [...]
The Dirtiest Word In Finance: Market Timing
In 2015, Cliff Asness made the case that to earn attractive returns with proper risk-based diversification and low correlation to traditional markets, investors need to [...]
Book Review — The Undoing Project: A Friendship That Changed Our Minds
Psychology permeates nearly every area of human endeavor. In the world of investing, for instance, psychology can help us understand the systematically poor decision-making that [...]
Don’t Make a Bar Bet with Warren Buffett
This past weekend Warren Buffet made some headlines that has the financial world spinning: Berkshire Hathaway released its annual report...which is always a great read. The [...]
Active Managers Should Love Passive Investing–It Makes Them Better!
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.
Swedroe Spotlight: Explaining the Low Risk Effect
Before proceeding, it’s important to note that beta and volatility are related, though not the same. Beta depends on volatility and correlation to the market, whereas volatility is related to idiosyncratic risk (see here for an explanation of how to calculate the different measures). The superior performance of low-volatility and low-beta stocks was first documented in the literature in the 1970s — by Fischer Black (in 1972) among others — even before the size and value premiums were “discovered.” And the low-volatility anomaly has been shown to exist in equity markets around the world. Interestingly, this finding is true not only for stocks, but for bonds as well. In other words, it has been pervasive.
Will ETFs Destroy Factor Investing? Nope.
One of the popular investing truisms is the following (inspired by Bill Sharpe): For somebody to beat the market (win) someone else has to lag [...]
Tactical Asset Allocation Insights via the Geeks from Thinknewfound
How do we identify who is a flash in the pan blogger versus the next Michael Kitces, Josh Brown, or Ben Carlson? We've tried to do our part and help to promote and share research from up and coming "undiscovered" bloggers/writers out there. In our early days, we were helped by long-time bloggers such as Meb Faber and Tadas Viskanta, so we try and return the favor. Recent examples of up and coming guest writers we've highlighted include Dan Sotiroff (now heading to Morningstar!), Aaron Brask, Andrew Miller, Elisabetta Basilico, and Dan Grioli -- all of whom have written interesting and insightful pieces!
Berkin and Swedroe’s Factor Investing Book
Well, I was midway through a formal book review on Larry and Andrew's new book, "Your Complete Guide to Factor-Based Investing," when I noticed that [...]
Shooting Yourself in the Foot with Socially Responsible Investing
Socially responsible investing (SRI). Environmental, Social, and Governance investing (ESG). Impact investing...and so on... These socially responsible investing concepts can be roughly described as portfolio [...]
Book Review — Loaded: Money, Psychology, and How to Get Ahead…
A few months ago I had the pleasure of hearing Sarah Newcomb speak at a recent Morningstar ETF conference. She was extraordinary. Although I only [...]
How to Reduce Taxes through Negotiation
Since this is my first post, I'll make a quick introduction before getting to the content: I love science and learning. In college, I majored in [...]
Go Skew Yourself with Managed Futures
Skewness is a statistical measure of how returns behave in the tails of a probability distribution. Wikipedia has a more robust definition of skewness with [...]
Factor ETF Due Diligence: A New Challenge for Some Investors
Factor investing seems to be everywhere, but the topic is still misunderstood by large swaths of the investing public. Tommi Johnsen and I would like [...]
An Interview with a Leading Academic Expert on ETFs
We spend a lot of our time thinking and learning about ETFs, since they are a critical new investor weapon in the war for after-tax [...]
Interest Rates and Value Investing
There is still no value in bonds today. The typical knee-jerk reaction to bold bond statements (such as the one above) is as follows: This guy is [...]
Book Review: Investing in Foreign Stocks
In their search for strong investment returns, many investors have increasingly looked abroad to international markets. International diversification makes sense from several perspectives. For instance, we [...]
The Rebalance Bonus for Value and Momentum Porfolios
A sophisticated DFA-focused advisor asked us to conduct some research on the following question: Are there additional portfolio diversification benefits to combining concentrated portfolios of value and [...]