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Improving Performance by Avoiding Negatives of Index Replication

By |June 16th, 2023|Price Pressure Factor, Index Updates, 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).

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Research Articles

By |November 23rd, 2022|

Published Research Articles Long-Only Value Investing: Does Size Matter? Author: Jack Vogel Abstract: The academic value factor (long cheap stocks, short expensive stocks) earns higher [...]

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The Role of the Secular Decline in Interest Rates in Asset Pricing Anomalies

By |November 10th, 2022|Research Insights, Value Investing Research, Macroeconomics Research|

Jules van Binsbergen, Liang Ma and Michael Schwert, authors of the September 2022 study “The Factor Multiverse: The Role of Interest Rates in Factor Discovery,” posed an interesting question: Are the findings of at least some of the reported anomalies the direct result of the 40-year secular decline in global interest rates and thus not really anomalies?

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The Cross Section of Stock Returns Pre-CRSP data: Value and Momentum are confirmed as robust anomalies

By |November 7th, 2022|Factor Investing, Research Insights, Basilico and Johnsen, Academic Research Insight, Value Investing Research, Momentum Investing Research|

We study the cross-section of stock returns using a novel constructed database of U.S. stocks covering 61 years of independent data.

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Why Advisors (and Family Offices) Should Consider Creating their Own ETFs

By |November 4th, 2022|ETF Operations, Tax Efficient Investing, ETF Investing|

Independent RIA firms seek to do what is "right" for the client, which often boils down to minimizing fees and taxes and increasing transparency/education (i.e., ETFs). But the "right" solution for an advisor's clients might not be available 'off-the-shelf' in the ETF market, or the advisor can't use ETFs because they are stuck "managing around" legacy portfolios and tax problems.

What's the solution? Allow advisors to create their own ETFs, which can be customized to deliver the specific investment program the advisor desires and allows an advisor to offer unique solutions for legacy tax issues tied to low-basis securities.

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The Short-Duration Equity Premium

By |September 15th, 2022|Larry Swedroe, Factor Investing, Research Insights, Academic Research Insight, Low Volatility Investing|

We examine the short-duration premium using pre-scheduled economic, monetary policy, and earnings announcements. We provide high-frequency evidence that duration premia associated with revisions of economic growth and interest rate expectations are consistent with asset pricing models but cannot explain the short-duration premium. Instead, we show that the trading activity of sentiment-driven investors raises prices of long-duration stocks, which lowers their expected returns, and results in the short-duration premium. Long-duration stocks have the lowest institutional ownership, exhibit the largest forecast errors at earnings announcements, and show the highest mispricing scores.

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Can You Keep Your Track Record After an ETF Conversion?

By |August 26th, 2022|ETF Operations, Research Insights, ETF Investing|

Here is the bottom line: converting into the ETF structure can bring a lot of benefits to the table, but porting your official track record over to an ETF can be challenging.

However, even if the facts and circumstances of your situation suggest that porting your official track record into an ETF is impossible, all is not lost. Retail consumers, institutional investors, platform providers, gate-keepers, and so forth, will likely be aware of your previous performance and reputation as an asset manager/advisor and they can often read between the lines. For example, if an advisor has been running the "ACME US Dividend Strategy" for 20 years, and this same advisor launches the "ACME US Dividend ETF" with the same investment process and investment objective, it doesn't take a rocket surgeon (or a brain scientist) to figure out that the ETF is probably a more tax-efficient version of the old strategy.

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