Do Security Analyst Recommendations Bet on or Against Academic Findings?
As my co-author Andrew Berkin, the director of research for Bridgeway Capital Management, and I explain in our new book, “Your Complete Guide to Factor-Based [...]
Tactical Asset Allocation: Does the Day of the Month Matter?
Most long-term approaches to investing, like tactical asset allocation or factor investing, are designed to trade infrequently, generally once a month or once a quarter. [...]
Academic Research Insight: The Value of Crowsourced Earnings Forecasts
Title: THE VALUE OF CROWDSOURCED EARNINGS FORECASTS Authors: RUSSELL JAME, RICK JOHNSTON, STANIMIR MARKOV, AND MICHAEL C. WOLFE Publication: JOURNAL OF ACCOUNTING RESEARCH, SEPTEMBER 2016 (version here) What [...]
Academic Research Insight: The Strategic Timing of Earnings News
Title: FURTHER EVIDENCE ON THE STRATEGIC TIMING OF EARNINGS NEWS: JOINT ANALYSIS OF WEEKDAYS AND TIMES OF DAY Authors: RONI MICHAEY, AMIR RUBIN, [...]
Active Share: Does it Predict Fund Performance?
The Holy Grail for mutual fund investors is the ability to identify in advance, which of the active mutual funds (or ETFs nowadays) will outperform [...]
“Passive” Investing: Theory and Practice in a Global Market
Purely passive investing is theoretically plausible but practically impossible. That said, the practical implementations can often be "good enough." As a theoretical index investor, you deploy [...]
Academic Research Insight: Factors and the Road to Retirement
Title: A WEALTH MANAGEMENT PERSPECTIVE ON FACTOR PREMIA AND THE VALUE OF DOWNSIDE PROTECTION Authors: LOUIS SCOTT AND STEFANO CAVAGLIA Publication: THE JOURNAL OF PORTFOLIO [...]
Academic Research Insight: Concentration is King
Title: PORTFOLIO CONCENTRATION AND PERFORMANCE OF INSTITUTIONAL INVESTORS WORLDWIDE Authors: NICOLE CHOI, MARK FEDEINA, HILLA SKIBA, TATYANA SOKOLYK Publication: JOURNAL OF FINANCIAL [...]
Academic Research Insight: Factor Investing Over the Long Run
Title: FACTOR BASED INVESTING: THE LONG TERM EVIDENCE Authors: ELROY DIMSON, PAUL MARSH, AND MIKE STAUNTON Publication: THE JOURNAL OF PORTFOLIO MANAGEMENT, [...]
Trust, but Verify: The Potential Problems of Blind Investing
Nobody can predict the future, but there is a chance the blind purchase of broad-index portfolios will come to an abrupt and potentially chaotic end when the [...]
The Value Premium: Risk or Mispricing?
One of the great debates in finance is whether the source of the value premium is risk-based or a behavioral anomaly. In our book, “Your [...]
Academic Research Insight: The Social Media Factor
Editor's Note: The Academic Research Insight will be a weekly short-form research summary on research that is directly related to investing. Elisabetta Basilico (a PhD [...]
Do Trading Costs Destroy Factor Investing?
There are a number of recent studies that propose a more rigorous criteria for evaluating the practical significance of factors published in academic research journals. [...]
Swedroe Spotlight: Enhancing Momentum Strategies Via Idiosyncratic Momentum
Momentum is the tendency for assets that have performed well (poorly) in the recent past to continue to perform well (poorly) in the future, at [...]
Tactical Asset Allocation and the US 60/40 Benchmark
Our firm Allocate Smartly provides independent analysis of Tactical Asset Allocation (TAA) strategies. TAA strategies dynamically allocate to broad asset classes like stock indices, bond indices or gold. Unlike [...]
Visualizing IRA Rules Using Flowcharts
The rules around IRAs are really complicated and Wes asked if we could share our flow charts on the subject so others could potentially benefit [...]
Swedroe Spotlight: Does Market Sentiment Help Explain Momentum?
David Smith, Na Wang, Ying Wang and Edward Zychowicz contribute to the literature on momentum with their paper, “Sentiment and the Effectiveness of Technical Analysis: Evidence from the Hedge Fund Industry,” which was published in the December 2016 issue of the Journal of Financial and Quantitative Analysis. Their work examines how investor sentiment affects the effectiveness of technical analysis strategies (which include the use of moving averages as well as momentum) used by hedge funds (which are considered sophisticated investors). The study was motivated by prior research that has focused on “investor sentiment,” which is the propensity of individuals to trade on noise and emotions rather than facts. Sentiment causes investors to have beliefs about future cash flows and investment risks that aren’t justified. Two researchers, Malcolm Baker and Jeffrey Wurgler, constructed an investor sentiment index based on six measures: trading volume as measured by NYSE turnover; the dividend premium (the difference between the average market-to-book ratio of dividend-payers and non-payers); the closed-end fund discount; the number and first-day returns of IPOs; and the equity share in new issues. Data is available at through Wurgler and New York University.
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 [...]