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Re: Good article on style premium investing & AQR new fund

Here's bottom line The more efficient way to do this is clearly with QSPIX, and the reason is that you do save some on the ER---because the administration expenses are 20bp for each fund and that is not split in half as it is a "fixed" cost. So it is 85bp vs 150bp. As you have heard me say...
by larryswedroe
Mon Sep 22, 2014 9:10 am
 
Forum: Investing - Theory, News & General
Topic: Good article on style premium investing & AQR new fund
Replies: 84
Views: 7527

Re: Good article on style premium investing & AQR new fund

nate Problem is that it might be shifting all the time so don't know how you would measure it Example one of the four factors/styles is the carry trade. And this is how they implement Bonds: measures of yield curve slope •Interest rates: roll-down yield •Currencies: cash rates and real rates •Commod...
by larryswedroe
Sun Sep 21, 2014 10:34 am
 
Forum: Investing - Theory, News & General
Topic: Good article on style premium investing & AQR new fund
Replies: 84
Views: 7527

Re: Premiums: Size, Value, Beta, Momentum

[url]The difficulty with factor investing is that past factor premiums are not reliable predictors of future factor premiums.[/url] This is just as true as saying beta premium isn't a reliable predictor of future beta. This idea about factors and how people think about them is just wrong because the...
by larryswedroe
Sun Sep 21, 2014 10:02 am
 
Forum: Investing - Theory, News & General
Topic: Premiums: Size, Value, Beta, Momentum
Replies: 40
Views: 2746

Re: Good article on style premium investing & AQR new fund

daufuskie Basically don't think they hold bonds as collateral They are say long value stocks and short growth stocks, and long positive MOM stocks and short negative MOM stocks, The idea is not to get bond like returns, bonds currently yielding say 2%, this would expect to get say 5, and you get som...
by larryswedroe
Sun Sep 21, 2014 9:56 am
 
Forum: Investing - Theory, News & General
Topic: Good article on style premium investing & AQR new fund
Replies: 84
Views: 7527

Re: Premiums: Size, Value, Beta, Momentum

Big John Nothing to do with being bold, just explaining the mistake IMO you are making, confusing alpha with beta. Factors have nothing to do with alpha which is the issue that one should not expect to get paid for. Beta one should expect to get paid for. Again, cannot answer why Rick made the state...
by larryswedroe
Sun Sep 21, 2014 8:54 am
 
Forum: Investing - Theory, News & General
Topic: Premiums: Size, Value, Beta, Momentum
Replies: 40
Views: 2746

Re: Another take on "rising equity glidepath" in retirement

Here's the problem with the rising glidepath approach IMO--it ignores a very important factor, human behavior. How many people do you know that are well into retirement that could tolerate a huge bear market and watch a large percent of their portfolio disappear, knowing they have no chance to earn ...
by larryswedroe
Sun Sep 21, 2014 8:50 am
 
Forum: Investing - Theory, News & General
Topic: Another take on "rising equity glidepath" in retirement
Replies: 14
Views: 1289

Re: Good article on style premium investing & AQR new fund

daufuskieNate The fund has nothing to do with duration, but targeting volatility. So you choose the fund that gets you the volatility you want, keeping in mind that AQR can only estimate the volatility, they cannot know it. QSPIX they expect to have equity like returns with about half the volatility...
by larryswedroe
Sun Sep 21, 2014 8:44 am
 
Forum: Investing - Theory, News & General
Topic: Good article on style premium investing & AQR new fund
Replies: 84
Views: 7527

Re: Premiums: Size, Value, Beta, Momentum

BigJohn That is just incorrect thinking , confusing alpha and beta (loading on factors) (And in fact I explained it right after the post you cited!!!) First, theory is that the "economic rent" should go to the scarce resource. When it comes to ACTIVE management as Jonathan Berk explained i...
by larryswedroe
Sat Sep 20, 2014 6:32 pm
 
Forum: Investing - Theory, News & General
Topic: Premiums: Size, Value, Beta, Momentum
Replies: 40
Views: 2746

Re: Left tail portfolio - 70% bonds. Good idea?

grap
We all make mistakes, the smart people admit them when they learn they are mistakes and don't repeat them.
Larry
by larryswedroe
Sat Sep 20, 2014 6:25 pm
 
Forum: Investing - Theory, News & General
Topic: Left tail portfolio - 70% bonds. Good idea?
Replies: 38
Views: 3093

Re: Why are DFA Core and Vector funds so light on value expo

Simple explanation is that it's MUCH easier to load on size than value because size is top half minus bottom half while value is top 30% minus bottom 30%, so some of it is definitional Second reason is that DFA uses negative momentum screens which lowers value loading (while cutting negative MOM loa...
by larryswedroe
Sat Sep 20, 2014 6:24 pm
 
Forum: Investing - Theory, News & General
Topic: Why are DFA Core and Vector funds so light on value exposure
Replies: 3
Views: 416

Re: Premiums: Size, Value, Beta, Momentum

Golf Thought I would point out one more issue you seem to be missing The convergence trades like the off the run vs the on the run Treasury aren't subject to huge gains or losses---which is why you have to leverage them to get a equity like return. So you can have situation where say 80% of your tra...
by larryswedroe
Sat Sep 20, 2014 9:03 am
 
Forum: Investing - Theory, News & General
Topic: Premiums: Size, Value, Beta, Momentum
Replies: 40
Views: 2746

Re: A look at the large value premium

Robert Since you mentioned it, while the data is very good on profitability, to me this is very likely a behavioral story since logically more profitable companies should be less, not more risky. You can make an argument for a risk explanation. a) More profitable companies will attract more competit...
by larryswedroe
Sat Sep 20, 2014 8:58 am
 
Forum: Investing - Theory, News & General
Topic: A look at the large value premium
Replies: 16
Views: 1790

Re: Premiums: Size, Value, Beta, Momentum

Golf First as I noted it was the LEVERAGE that was their great undoing. The directional bets contributed. And 20% even of 100B in assets is a huge position as it was related to just $5b of capital. IT was not the basic strategy as you think or thought. In fact the trades were all profitable if they ...
by larryswedroe
Fri Sep 19, 2014 10:10 pm
 
Forum: Investing - Theory, News & General
Topic: Premiums: Size, Value, Beta, Momentum
Replies: 40
Views: 2746

Re: A look at the large value premium

Browser
Basically the answer is do they give you the loadings you want on the factors you want in an efficient way.
Larry
by larryswedroe
Fri Sep 19, 2014 5:32 pm
 
Forum: Investing - Theory, News & General
Topic: A look at the large value premium
Replies: 16
Views: 1790

Re: Premiums: Size, Value, Beta, Momentum

BigJohn I don't have any clue why Rick would make such a statement. What I can say is that the persistence and pervasiveness of the premiums is there, as is the statistical significance, and the size of the premiums are relatively large, so the question is why one would not expect to earn the premiu...
by larryswedroe
Fri Sep 19, 2014 5:30 pm
 
Forum: Investing - Theory, News & General
Topic: Premiums: Size, Value, Beta, Momentum
Replies: 40
Views: 2746

Re: A look at the large value premium

Jaab I agree One reason IMO you can or should believe in the value premium is that basically no matter how you measure value it shows up, it's not dependent on one metric. If it was it is more likely to be a data mining result. And IMO there isn't really any logical reason to believe one metric is b...
by larryswedroe
Fri Sep 19, 2014 12:04 pm
 
Forum: Investing - Theory, News & General
Topic: A look at the large value premium
Replies: 16
Views: 1790

Re: A look at the large value premium

Browser
FWIW I think the answer is that one is better served by a multiple metric approach to these factors, like quality and value, as many funds do.
Larry
by larryswedroe
Fri Sep 19, 2014 10:26 am
 
Forum: Investing - Theory, News & General
Topic: A look at the large value premium
Replies: 16
Views: 1790

Re: Left tail portfolio - 70% bonds. Good idea?

jdb
Don't follow that spread but this spread is widest I recall and no reason not to own them if have higher yields since no credit risk if stay within limits

Bustoff
Because most people don't know what they don't know

Larry
by larryswedroe
Fri Sep 19, 2014 10:24 am
 
Forum: Investing - Theory, News & General
Topic: Left tail portfolio - 70% bonds. Good idea?
Replies: 38
Views: 3093

Re: Good article on style premium investing & AQR new fund

Sammy, yes I know it would be out soon, that's about half the volatility and half the fee
Larry
by larryswedroe
Fri Sep 19, 2014 10:17 am
 
Forum: Investing - Theory, News & General
Topic: Good article on style premium investing & AQR new fund
Replies: 84
Views: 7527

A look at the large value premium

http://www.etf.com/sections/index-investor-corner/23315-swedroe-on-large-stock-value-premium.html

IMO another argument for a multi-metric approach to looking at factors, be it value or profitability

Larry
by larryswedroe
Fri Sep 19, 2014 8:52 am
 
Forum: Investing - Theory, News & General
Topic: A look at the large value premium
Replies: 16
Views: 1790

Re: Premiums: Size, Value, Beta, Momentum

BigJohn Question is why you shouldn't expect premiums in return for the risk when the evidence is just as persistent and pervasive for the other factors? Golf Well the article is certainly incorrect, making the same mistake you made about leverage--saying it was "only" about 25:1 ---that l...
by larryswedroe
Fri Sep 19, 2014 8:48 am
 
Forum: Investing - Theory, News & General
Topic: Premiums: Size, Value, Beta, Momentum
Replies: 40
Views: 2746

Re: Left tail portfolio - 70% bonds. Good idea?

the bond fund zigged up more than individual bonds This is just plain wrong. Individual bonds move just the same as a fund. The only case might be a CD with an early redemption penalty, but a secondary market CD would have no such penalty. Note also that the current yield curve reflects all the inf...
by larryswedroe
Fri Sep 19, 2014 8:38 am
 
Forum: Investing - Theory, News & General
Topic: Left tail portfolio - 70% bonds. Good idea?
Replies: 38
Views: 3093

Re: Immediate payable annuity is a bad investment?

Few thoughts here First an annuity is insurance against living longer than expected. Second, insurance companies have costs of distribution and they need to earn profit in excess of cost of capital---that means when your young and mortality credits are small you can replicate an annuity yourself at ...
by larryswedroe
Fri Sep 19, 2014 8:31 am
 
Forum: Investing - Theory, News & General
Topic: Immediate payable annuity is a bad investment?
Replies: 45
Views: 2409

Re: Premiums: Size, Value, Beta, Momentum

Golf As I noted they made big bets on Russian and Brazilian debts among other things which are pure directional bets, nothing to do with convergence trades. If you have $4.7b in equity and over $1 trillion in risk, not just assets (including the derivatives) your leverage ratio is well over 100. The...
by larryswedroe
Thu Sep 18, 2014 8:59 am
 
Forum: Investing - Theory, News & General
Topic: Premiums: Size, Value, Beta, Momentum
Replies: 40
Views: 2746

Re: Premiums: Size, Value, Beta, Momentum

golf That is wrong, the 100% leverage is what led to the situation, not at the end. And they kept pushing the leverage higher and higher over time, it wasn't like a one time near the end thing. IMO you have the whole thing incorrectly. YOu can see for yourself in the below information showing the le...
by larryswedroe
Wed Sep 17, 2014 7:50 pm
 
Forum: Investing - Theory, News & General
Topic: Premiums: Size, Value, Beta, Momentum
Replies: 40
Views: 2746

Re: Jason's Zweig's new dictionary ---enjoy

leerar
A compensation scheme designed to transfer your money to their wallets
Larry
by larryswedroe
Wed Sep 17, 2014 4:37 pm
 
Forum: Investing - Theory, News & General
Topic: Jason's Zweig's new dictionary ---enjoy
Replies: 27
Views: 2439

Re: Premiums: Size, Value, Beta, Momentum

Golf Then suggest you go back and read again. They made HUGE directional bets that had nothing to do with convergence AND they began using huge leverage because the markets worked against them. Here's what happened, LTCM was successful with convergence trades, mainly with 30 year Treasury vs 29 year...
by larryswedroe
Wed Sep 17, 2014 8:45 am
 
Forum: Investing - Theory, News & General
Topic: Premiums: Size, Value, Beta, Momentum
Replies: 40
Views: 2746

Re: John Hussman, smart guy, should you listen to his foreca

James As already noted time has told the story. And not just with Hussman, but an industry that has tried to benefit from such Tactical Asset Allocation that Hussman preaches. One study on 100 pension plans engaging in it, by hiring the "Hussman's" of the world found that not one single on...
by larryswedroe
Wed Sep 17, 2014 8:41 am
 
Forum: Investing - Theory, News & General
Topic: John Hussman, smart guy, should you listen to his forecasts
Replies: 70
Views: 6906

Re: Cliff Asness note on CALPERS firing hedge funds

Jeff
So what forecast exactly did Asness make that we should either ignore or heed?
Larry
by larryswedroe
Wed Sep 17, 2014 8:37 am
 
Forum: Investing - Theory, News & General
Topic: Cliff Asness note on CALPERS firing hedge funds
Replies: 6
Views: 800

Jason's Zweig's new dictionary ---enjoy

http://www.jasonzweig.com/dictionary/

I'm sure Boglehead's will enjoy reading Jason's dictionary

Larry
by larryswedroe
Wed Sep 17, 2014 8:27 am
 
Forum: Investing - Theory, News & General
Topic: Jason's Zweig's new dictionary ---enjoy
Replies: 27
Views: 2439

Re: Cliff Asness note on CALPERS firing hedge funds

Was my pleasure to have dinner one night with Cliff, and it was a great pleasure.
Larry
by larryswedroe
Tue Sep 16, 2014 11:26 pm
 
Forum: Investing - Theory, News & General
Topic: Cliff Asness note on CALPERS firing hedge funds
Replies: 6
Views: 800

Re: The types of investment accounts handled by advisors?

Mason
Can only speak for my own firm is that we can and do report on all types of accounts. In addition we advise on something like 1,000 401k plans across the country and also are approaching $1b in AUM from endowments and other not for profits.
Larry
by larryswedroe
Tue Sep 16, 2014 11:25 pm
 
Forum: Investing - Theory, News & General
Topic: The types of investment accounts handled by advisors?
Replies: 1
Views: 217

Re: Premiums: Size, Value, Beta, Momentum

golf What one should get from When Genius Failed is that the failure had NOTHING to do with quants, but egos who thought they knew better. They made bets that had nothing to do with quantitative analysis, just pure directly bets, unlike how the fund started which was arb based on statistical relatio...
by larryswedroe
Tue Sep 16, 2014 11:22 pm
 
Forum: Investing - Theory, News & General
Topic: Premiums: Size, Value, Beta, Momentum
Replies: 40
Views: 2746

Re: Bridgeway Omni SCV (BOTSX) vs PXSV

Angst, the answer IMO is simply because that has been the convention since FF used it.
Larry
by larryswedroe
Tue Sep 16, 2014 11:19 pm
 
Forum: Investing - Theory, News & General
Topic: Bridgeway Omni SCV (BOTSX) vs PXSV
Replies: 31
Views: 2465

Cliff Asness note on CALPERS firing hedge funds

https://www.aqr.com/cliffs-perspective

Personally I think Cliff is one of the brightest minds (and funniest) in finance. Always worth reading what he writes, even if you don't agree with him.

Larry
by larryswedroe
Tue Sep 16, 2014 6:26 pm
 
Forum: Investing - Theory, News & General
Topic: Cliff Asness note on CALPERS firing hedge funds
Replies: 6
Views: 800

Re: Bridgeway Omni SCV (BOTSX) vs PXSV

Don't know if this will help but .. First, value investing is about buying assets with low prices to some metric Second, financial economists have tested many common metrics like p/b, p/c, p/s, p/d, p/e, p/ebitda, etc. They all show value premiums, differing in size depending sometimes on the time p...
by larryswedroe
Tue Sep 16, 2014 6:22 pm
 
Forum: Investing - Theory, News & General
Topic: Bridgeway Omni SCV (BOTSX) vs PXSV
Replies: 31
Views: 2465

Re: Premiums: Size, Value, Beta, Momentum

The difficulty with factor investing is that past factor premiums are not reliable predictors of future factor premiums. A factor investor must continually "upgrade" by finding new factors as other investor crowd the marketplace. some problems IMO with this statement First, This is no les...
by larryswedroe
Tue Sep 16, 2014 4:40 pm
 
Forum: Investing - Theory, News & General
Topic: Premiums: Size, Value, Beta, Momentum
Replies: 40
Views: 2746

Re: A History of the Equity Risk Premium and its Estimation

Rick
Just would add that just because correlations are dynamic (true) doesn't mean the information isn't useful--it's the same thing with premiums, they are dynamic, time shifting as well. Doesn't mean that it's not useful information.
Larry
by larryswedroe
Tue Sep 16, 2014 2:57 pm
 
Forum: Investing - Theory, News & General
Topic: A History of the Equity Risk Premium and its Estimation
Replies: 19
Views: 1664

Re: John Hussman, smart guy, should you listen to his foreca

FWIW I think it's "jibberish" because the evidence shows it's not actionable in way to generate excess returns. Huffman certainly hasn't--and one study on 100 pension plans that engaged in this sort of tactical asset allocation showed that NOT A SINGLE ONE benefit. Thus to me it's jibberis...
by larryswedroe
Tue Sep 16, 2014 2:54 pm
 
Forum: Investing - Theory, News & General
Topic: John Hussman, smart guy, should you listen to his forecasts
Replies: 70
Views: 6906

Re: John Hussman, smart guy, should you listen to his foreca

James
No idea why you wrote or quoted that, to me it's basically jibberish, investment porn--especially since market prices are driven by active investors, not passive, and the idea that buy and hold hit its peak say in 1929, or 68, or 99 (leading to bubbles) is just nonsense.
Larry
by larryswedroe
Tue Sep 16, 2014 9:02 am
 
Forum: Investing - Theory, News & General
Topic: John Hussman, smart guy, should you listen to his forecasts
Replies: 70
Views: 6906

Re: Good article on style premium investing & AQR new fund

jaab
Yes they provide benchmarks and also attribution analysis when needed, but that's with us, don't know what they do publicly

I told them Asness's new piece should be called Cliff Notes

Larry
by larryswedroe
Tue Sep 16, 2014 8:54 am
 
Forum: Investing - Theory, News & General
Topic: Good article on style premium investing & AQR new fund
Replies: 84
Views: 7527

Re: Premiums: Size, Value, Beta, Momentum

Re Investment Factor When recently asked what he would do if he knew in 1992 what he knows today Fama responded I'd use a four factor model, beta, size, investment and profitability---with value and momentum being subsumed now. This explains returns while eliminating almost all the anomalies. Fama s...
by larryswedroe
Tue Sep 16, 2014 8:49 am
 
Forum: Investing - Theory, News & General
Topic: Premiums: Size, Value, Beta, Momentum
Replies: 40
Views: 2746

Re: Good article on style premium investing & AQR new fund

FWIW
They will be coming out with a new version of the fund with about half the expense ratio, but targetting half the volatility. So more bond like volatility, rather than about half the stock volatility, and of course lower returns
Larry
by larryswedroe
Mon Sep 15, 2014 11:06 pm
 
Forum: Investing - Theory, News & General
Topic: Good article on style premium investing & AQR new fund
Replies: 84
Views: 7527

Re: A History of the Equity Risk Premium and its Estimation

daufuskieNate When you run an MCS you are putting in ANNUAL returns and SD and correlations. The MCS then gives you thousands of scenarios that show the impact of the volatility on annualized returns of course---along with the correlations impacts. If you only ran a single asset class, say TSM, you ...
by larryswedroe
Mon Sep 15, 2014 9:30 pm
 
Forum: Investing - Theory, News & General
Topic: A History of the Equity Risk Premium and its Estimation
Replies: 19
Views: 1664

Re: CalPERS Eliminates Hedge Fund Program

And unlike us small investors who can heavily load on factors like small/value CALPERS really is too big to do that, cannot put tens of billions into small corner of the market , so don't see how they can get there from here without lots of luck.

Larry
by larryswedroe
Mon Sep 15, 2014 9:27 pm
 
Forum: Investing - Theory, News & General
Topic: CalPERS Eliminates Hedge Fund Program
Replies: 44
Views: 2843

Re: How much value can an advisor add for the average invest

schofinator Simple ask him to show you his/her custodial account statement showing his investments. In my case always happy to do that--and if the person wants he can redact the numbers In my firm's case the offerings in our 401k plan are the same as we recommend to clients. And the sinking fund we ...
by larryswedroe
Mon Sep 15, 2014 7:42 pm
 
Forum: Investing - Theory, News & General
Topic: How much value can an advisor add for the average investor?
Replies: 71
Views: 4632

Re: A History of the Equity Risk Premium and its Estimation

well you get exactly the opposite answer here IMO the best approach is the MCS (monte carlo simulation), without which my own view is it's difficult to make any decision since you cannot see how marginal changes in any assumptions impacts odds of success. The inputs are the average annual returns, p...
by larryswedroe
Mon Sep 15, 2014 7:39 pm
 
Forum: Investing - Theory, News & General
Topic: A History of the Equity Risk Premium and its Estimation
Replies: 19
Views: 1664
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