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 [...]
Visual Active Share: A Tool to Help Investors Make Better Decisions
We've talked extensively about the concepts of active share and active fee, which aren't flawless metrics, but they have elevated the discussion around identifying and [...]
Looking to Improve your Factor Investing? Examine the Trend of Profits
A few years ago, the profitability "quality" factor was originally proposed by Robert Novy-Marx. Here is a snippet from the abstract of the paper: Profitability, [...]
Factor Investing: The Fama French 5-Factor Model on Chinese A-Shares
Each year I teach my "seminar in investments" course at Drexel, which consists of the Masters in Finance students and a handful of geeky MBA [...]
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 [...]
Warning: The US Stock Market is an Anomaly
U.S. stocks have delivered incredible stock market returns for a long time: the average compounded total return on the U.S. stock market has been nearly [...]
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 [...]
Dual Momentum with Stock Selection
Jack did a nice recap on a momentum paper last week that looks at using fundamentals (revenue volatility, low cost of goods, and B/M) to help identify the best price momentum stocks. This paper sounds similar to the paper Jack reviewed, but there is a key difference: the researchers are looking at the momentum of the fundamentals, not the absolute value of the fundamentals. The authors compile a fundamental momentum variable by calculating the moving averages of 7 elements: return on equity return on assets earnings per share accrual-based operating profitability cash-based operating profitability gross profitability net payout ratio
Firm-Specific Information and Momentum Investing
When it comes to momentum investing, everyone is always looking for a better way to implement a momentum-based stock selection strategy (the same goes for a [...]
Evidence-Based Investing? Take that Alpha and Shove It.
Johnny Paycheck has a great country song centered around the following lyric: Take this job and shove it...I ain't working here no more... Campbell Harvey, [...]
DIY Asset Allocation Weights: March 2017
Do-It-Yourself tactical asset allocation weights are posted. Create a free account here if you want to access the site directly. Sign in here if you already have a [...]
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 [...]
Podcast: Momentum Investing Part 2/2 (Wes)
Here is a link to our podcast on The Investors Podcast In this episode, Preston and Stig continue their conversation with Dr. Wesley Gray. Dr. [...]
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.
Active Versus Passive Investing: Can we End the Confusion?
I've noticed something profound the past few years: depending on your audience, the definition of active investing and passive investing is different. To a financial [...]
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.
President’s Day Factor Investing Geekout
Our epic piece on factors from a few weeks ago is still ringing in our own ears: Are factors even real? Or just data-mining? The [...]
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 [...]