Other Insights

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.

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!

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 [...]

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 [...]

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