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Re: are you too conservative with your investments?

Bustoff
Flight to quality and liquidity and also call risk might have been responsible
Larry
by larryswedroe
Tue Apr 22, 2014 11:45 am
 
Forum: Investing - Theory, News & General
Topic: are you too conservative with your investments?
Replies: 9
Views: 1128

Re: The EMH, fact or fiction

thx
Yes someone pointed that out and it has been fixed
No matter how many times one reads things and has checkers errors show up still, learned that writing all those books
Larry
by larryswedroe
Tue Apr 22, 2014 9:58 am
 
Forum: Investing - Theory, News & General
Topic: The EMH, fact or fiction
Replies: 5
Views: 345

Re: are you too conservative with your investments?

there are some problems with the system used by CBS to load posts, however the table problem should now be fixed
Larry
by larryswedroe
Tue Apr 22, 2014 9:56 am
 
Forum: Investing - Theory, News & General
Topic: are you too conservative with your investments?
Replies: 9
Views: 1128

The EMH, fact or fiction

http://seekingalpha.com/article/2152323-the-efficient-market-hypothesis-fact-or-fiction-part-1?v=1398116501

first of a four part series on subject

Bottom line is that the EMH fails every test except for the only one that matters

Hope you find the series of interest
Best wishes
Larry
by larryswedroe
Tue Apr 22, 2014 9:11 am
 
Forum: Investing - Theory, News & General
Topic: The EMH, fact or fiction
Replies: 5
Views: 345

are you too conservative with your investments?

http://www.cbsnews.com/news/are-you-too-conservative-with-your-investments/

It's possible to become too conservative, especially after "lessons" like the Great Depression and the financial crisis of 2008

Best wishes
Larry
by larryswedroe
Tue Apr 22, 2014 9:10 am
 
Forum: Investing - Theory, News & General
Topic: are you too conservative with your investments?
Replies: 9
Views: 1128

Re: Trying to learn about Brokered CD's

One note is that in secondary market brokered CDs tend to trade at HIGHER YIELDS (which is why we tend to buy them there, just like with munis which tend to trade at higher yields in secondary than in initial offering)
Larry
by larryswedroe
Mon Apr 21, 2014 5:09 pm
 
Forum: Investing - Theory, News & General
Topic: Trying to learn about Brokered CD's
Replies: 21
Views: 1102

Re: Second part of series on value risk story

steve Unfortunately there was some editorial confusion, not sure exactly where Here is what the sixth paper should have said,and what I submitted--and having them change Our sixth and final paper is the 2014 study, “Value Premium and Default Risk,” which covered the period 1927-2011. The authors fou...
by larryswedroe
Mon Apr 21, 2014 2:05 pm
 
Forum: Investing - Theory, News & General
Topic: Second part of series on value risk story
Replies: 2
Views: 318

Re: part two of the risk blog post

afan WE come to very different conclusions looking at the data, but that's fine of course However, there are few things I would disagree with First, the people who cite no small premium all seem to use the start point is post 83---Now we know that valuations matter and they matter a great deal. Well...
by larryswedroe
Mon Apr 21, 2014 10:30 am
 
Forum: Investing - Theory, News & General
Topic: part two of the risk blog post
Replies: 9
Views: 797

Second part of series on value risk story

One of the more interesting areas of finance as good explanations on both sides. Even the default risk papers show mixed results

http://www.etf.com/sections/index-investor-corner/21834-swedroe-more-on-value-premium-and-risk.html

Best wishes
Larry
by larryswedroe
Mon Apr 21, 2014 8:50 am
 
Forum: Investing - Theory, News & General
Topic: Second part of series on value risk story
Replies: 2
Views: 318

Re: Value & Growth - 20 Years In Style

I've always said that "alpha goes to the manager. That's right from Jonathan Berk's 5 Myths of Active Management, or at least that's what what should happen as the alpha should go to the scarce resource. But would add DFA gets you more beta (loading on a factor) and not alpha. It's just that t...
by larryswedroe
Sun Apr 20, 2014 8:45 am
 
Forum: Investing - Theory, News & General
Topic: Value & Growth - 20 Years In Style
Replies: 14
Views: 1076

Re: part two of the risk blog post

cfs Not sure of exact date, it's in production though and should be within next few weeks Reducing the Risk of Black Swans: Using the Science of Investing to Capture Returns with Less Volatility Will be in E version and paperback Here are some blurbs for the book: What Larry writes is always worth r...
by larryswedroe
Sun Apr 20, 2014 8:36 am
 
Forum: Investing - Theory, News & General
Topic: part two of the risk blog post
Replies: 9
Views: 797

Re: part two of the risk blog post

afan
historically at least you can create more efficient portfolios, using Sharpe Ratio as measure, by using low beta/high tilt portfolios.
BTW-my new book should be out in few weeks
Larry
by larryswedroe
Sat Apr 19, 2014 9:52 pm
 
Forum: Investing - Theory, News & General
Topic: part two of the risk blog post
Replies: 9
Views: 797

Re: part two of the risk blog post

Thx
Similar in some ways but I don't think exactly the same
Think about this,

diversifying to international and EM isn't maverick risk, but does take tracking error risk
But owning index funds 25 years ago was maverick risk

It's more about doing something different/new

Larry
by larryswedroe
Fri Apr 18, 2014 9:28 am
 
Forum: Investing - Theory, News & General
Topic: part two of the risk blog post
Replies: 9
Views: 797

Re: AMH - Interested in Larry Swedroe's Thoughts

Tim
The book just went to production today so should be out shortly

Larry
by larryswedroe
Thu Apr 17, 2014 8:09 pm
 
Forum: Investing - Theory, News & General
Topic: AMH - Interested in Larry Swedroe's Thoughts
Replies: 4
Views: 617

Re: AMH - Interested in Larry Swedroe's Thoughts

First, Lo is very smart guy and one of leading thinkers in finance IMO. Second, the AMH is basically how the world works. The models we have are just that, not laws like in physics. But as we learn more the models get better and anomalies often then disappear (if they can be, often limits to arbitra...
by larryswedroe
Thu Apr 17, 2014 6:14 pm
 
Forum: Investing - Theory, News & General
Topic: AMH - Interested in Larry Swedroe's Thoughts
Replies: 4
Views: 617

Re: Japan Does not Show That Stocks are Dangerous

FWIW
I have Japanese small value stock return data (not large unfortunately) for period 1990-Feb 2014
Annualized return 3.9%. Total return 151% SD 24.3

Larry
by larryswedroe
Wed Apr 16, 2014 9:16 am
 
Forum: Investing - Theory, News & General
Topic: Japan Does not Show That Stocks are Dangerous
Replies: 79
Views: 4089

Re: Asness & Fama on Bloomberg TV NOW

I believe Fama owns market like portfolio because his own investment in DFA is very heavily tilted to small and value already
Larry
by larryswedroe
Wed Apr 16, 2014 9:06 am
 
Forum: Investing - Theory, News & General
Topic: Asness & Fama on Bloomberg TV NOW
Replies: 23
Views: 1147

Re: You don't want to be member of the hedge fund club

chead The way to deal with survivorship bias, which is HUGE, maybe 3-6% a year, is to use funds of hedge funds which don't tend to disappear as hedge funds themselves dos Also you're correct that hedge funds are not an asset class, but investment vehicles (that are great at transferring money from t...
by larryswedroe
Wed Apr 16, 2014 9:03 am
 
Forum: Investing - Theory, News & General
Topic: You don't want to be member of the hedge fund club
Replies: 13
Views: 2286

You don't want to be member of the hedge fund club

My first quarter update
My apologies for the size of the table, I've asked them to correct it
http://www.cbsnews.com/news/dont-be-a-member-of-the-hedge-fund-club/
Larry
by larryswedroe
Tue Apr 15, 2014 9:56 pm
 
Forum: Investing - Theory, News & General
Topic: You don't want to be member of the hedge fund club
Replies: 13
Views: 2286

Re: Another take on the "rebalancing bonus"

Browser I very much disagree. There is really no logical argument (other than frictions) IMO to not rebalance. Why would one allow the market to determine your asset allocation. That's like saying rising stocks lead you to conclude that you should take more risk and alter your AA to higher stock all...
by larryswedroe
Tue Apr 15, 2014 4:37 pm
 
Forum: Investing - Theory, News & General
Topic: Another take on the "rebalancing bonus"
Replies: 63
Views: 3550

Re: SCV premium is a history/math story, its not scientific

cowboys would you draw the same conclusion by looking at the returns of stocks vs LT Treasuries for the much longer 40 year period 69-08 when they had same returns, no ERP? Over even fairly long periods risks can show up and that's what happened over that particular 10 year period. Try the 5 year pe...
by larryswedroe
Tue Apr 15, 2014 8:48 am
 
Forum: Investing - Theory, News & General
Topic: SCV premium is a history/math story, its not scientific
Replies: 46
Views: 2255

Re: High Yield Bonds as an Annuity?

FWIW, the only kind of high yield bonds that have exhibited good risk/reward characteristics are the "fallen angels" --Once investment grade that became high yield or junk The reason they have done okay is that when they lose their investment grade status many institutional investors will ...
by larryswedroe
Tue Apr 15, 2014 8:46 am
 
Forum: Investing - Theory, News & General
Topic: High Yield Bonds as an Annuity?
Replies: 23
Views: 1689

Re: SCV premium is a history/math story, its not scientific

cowboysfan It seems that if markets are efficient, then any benefits there might be to a strategy of tilting to SCV will eventually go away as the strategy becomes more popular. If it really is possible to obtain a higher return for a given amount of risk through a combination of SCV/bonds compared ...
by larryswedroe
Mon Apr 14, 2014 11:25 pm
 
Forum: Investing - Theory, News & General
Topic: SCV premium is a history/math story, its not scientific
Replies: 46
Views: 2255

Re: What exactly is a risk premium?

redcat
It's priced by looking at value metrics like p/b, p/e, p/cf and p/s
The wider the spread the larger the expected premium

Larry
by larryswedroe
Mon Apr 14, 2014 11:18 pm
 
Forum: Investing - Theory, News & General
Topic: What exactly is a risk premium?
Replies: 14
Views: 981

Re: What exactly is a risk premium?

Rick, he did not say 80% bonds and 20% stocks have higher return and lower SD than 100% stocks, but that 80% bonds and 20% stocks had higher return and lower SD than 100% bonds. That's very different. And of course it might not have held in some periods. What he said is true if you use LT (20 year b...
by larryswedroe
Mon Apr 14, 2014 11:17 pm
 
Forum: Investing - Theory, News & General
Topic: What exactly is a risk premium?
Replies: 14
Views: 981

Re: Another take on the "rebalancing bonus"

people confuse this issue all the time, in fact most of the time should expect rebalanced portfolios (of balanced stock and bonds) will UNDERPERFORM because most of time you are selling the high expected returning asset class to buy the lower expected returning one, lowering the expected return of t...
by larryswedroe
Mon Apr 14, 2014 10:59 pm
 
Forum: Investing - Theory, News & General
Topic: Another take on the "rebalancing bonus"
Replies: 63
Views: 3550

Re: SCV premium is a history/math story, its not scientific

"Larry Swedroe says we should not confuse strategy and outcome, but IMHO it is all but impossible to evaluate strategies in any fundamental way" Consider the following The best example is someone who is married and has young kids and decides to buy life insurance to protect against prematu...
by larryswedroe
Mon Apr 14, 2014 5:57 pm
 
Forum: Investing - Theory, News & General
Topic: SCV premium is a history/math story, its not scientific
Replies: 46
Views: 2255

Re: Fundamental Indexing

bernston Another problem is that because of their ANNUAL reconstitution (DFA reconstitutes eligible universe monthly, as does Bridgeway and AQR I believe) which causes the funds to lose exposure to the premiums over the course of a year, and then on reconstitution they get it back and then drift aga...
by larryswedroe
Mon Apr 14, 2014 3:16 pm
 
Forum: Investing - Theory, News & General
Topic: Fundamental Indexing
Replies: 9
Views: 775

Re: Fundamental Indexing

there have been good studies on them and they are nothing more than a size and value tilt in different package, even Arnott was "forced" to admit this basically
Now that doesn't make them bad, but this "economic footprint" idea is marketing, not finance
Larry
by larryswedroe
Mon Apr 14, 2014 12:37 pm
 
Forum: Investing - Theory, News & General
Topic: Fundamental Indexing
Replies: 9
Views: 775

Re: SCV premium is a history/math story, its not scientific

dbr
I think that is exactly the point I made in my post, you should have a logical reason to take any risk, be it ERP or size or value or EM or term or default, or whatever
Larry
by larryswedroe
Mon Apr 14, 2014 9:41 am
 
Forum: Investing - Theory, News & General
Topic: SCV premium is a history/math story, its not scientific
Replies: 46
Views: 2255

Re: What exactly is a risk premium?

First, the risks are very different for small and value stocks, Here is list I've presented before if you're interested in the research on trying to find the explanations for the premiums 1.Baruch Lev and Theodore Sougiannis, “Penetrating the Book-to-Market Black Box,” Journal of Business Finance an...
by larryswedroe
Mon Apr 14, 2014 9:03 am
 
Forum: Investing - Theory, News & General
Topic: What exactly is a risk premium?
Replies: 14
Views: 981

Re: How can "value beats growth" be a rule?

FWIW Here's the long term returns and SD data since 1926 LG 9.5/18.7 LV 10.6/26 So no question value stocks had both higher returns and higher SD--using SD as measure of risk value stocks clearly much riskier (and by market cap large value is much higher percentage of total value stocks than small c...
by larryswedroe
Mon Apr 14, 2014 8:55 am
 
Forum: Investing - Theory, News & General
Topic: How can "value beats growth" be a rule?
Replies: 21
Views: 1354

Re: SCV premium is a history/math story, its not scientific

well I guess that it's purely a coincidence that A) After FF original study showing size and value premiums for 63-92, that we now have out of sample tests both before 63 and after 92 that show not only the same premiums but similar size B) We have the same premiums in developed markets all around t...
by larryswedroe
Mon Apr 14, 2014 8:48 am
 
Forum: Investing - Theory, News & General
Topic: SCV premium is a history/math story, its not scientific
Replies: 46
Views: 2255

Re: Can I get some alpha? (DFA / Wealthfront)

bernston Glad you found it helpful Here's another important point. While growth companies do have faster growth of earnings (and lower SD of earnings as well) the problem is that investors persistently underestimate the tendency of abnormal earnings (faster or slower than average) to RTM. Faster gro...
by larryswedroe
Sun Apr 13, 2014 2:25 pm
 
Forum: Investing - Theory, News & General
Topic: Can I get some alpha? (DFA / Wealthfront)
Replies: 58
Views: 2951

Re: How can "value beats growth" be a rule?

Nisiprius Your point is exactly what Fama and French wrote in their paper and have been describing---it's a preference, one that is "irrational" from a logical man perspective so it's an anomaly for the EMH which assumes people act rationally--which is why the EMH is just a model and not a...
by larryswedroe
Sun Apr 13, 2014 2:21 pm
 
Forum: Investing - Theory, News & General
Topic: How can "value beats growth" be a rule?
Replies: 21
Views: 1354

Re: How can "value beats growth" be a rule?

First, value should always be expected to beat growth, it's simple cost of capital story. Even if people crowd into the trade the result should only be a shrinking not disappearance of the premium, because it's RELATIVE, top 30% of stocks are growth and bottom are value. The wider the spread in rela...
by larryswedroe
Sun Apr 13, 2014 1:04 pm
 
Forum: Investing - Theory, News & General
Topic: How can "value beats growth" be a rule?
Replies: 21
Views: 1354

Re: Can I get some alpha? (DFA / Wealthfront)

Here are some more thoughts on risks of value companies There are many academic papers that provide simple and logic risk explanations for the value premium. For example, value companies typically are more leveraged (have higher debt-to-equity ratios), they have higher operating leverage (making the...
by larryswedroe
Sun Apr 13, 2014 9:04 am
 
Forum: Investing - Theory, News & General
Topic: Can I get some alpha? (DFA / Wealthfront)
Replies: 58
Views: 2951

Re: Value vs Growth in one sentence

Fama and French wrote paper on the subject, “Disagreement, Tastes, and Asset Prices” which showed how investor preferences for assets with “lottery-like” characteristics can lead to mispricings of assets when viewed from a rational perspective (explaining, for example, the small growth anomaly) http...
by larryswedroe
Sat Apr 12, 2014 11:15 pm
 
Forum: Investing - Theory, News & General
Topic: Value vs Growth in one sentence
Replies: 3
Views: 461

Re: Can I get some alpha? (DFA / Wealthfront)

steve First you can look at any few stocks and make a nice story. Why not choose some other growth stocks in the list and ask the question. Perhaps say a J&J and compare that to say GM. Now you can also get bubbles in growth stocks, especially in hot sectors like you mentioned, that you don't ge...
by larryswedroe
Sat Apr 12, 2014 11:12 pm
 
Forum: Investing - Theory, News & General
Topic: Can I get some alpha? (DFA / Wealthfront)
Replies: 58
Views: 2951

Re: Can I get some alpha? (DFA / Wealthfront)

steve The fact is that value stocks have much higher volatility of earnings, more leverage, higher sd of dividends, more exposure to default risk, more irreversible capital (so hard to cut back expenses in recessions), and a fewer capital options, and they tend to do very poorly in financial crises,...
by larryswedroe
Sat Apr 12, 2014 2:04 pm
 
Forum: Investing - Theory, News & General
Topic: Can I get some alpha? (DFA / Wealthfront)
Replies: 58
Views: 2951

Re: Can I get some alpha? (DFA / Wealthfront)

steve The fact is that value stocks have much higher volatility of earnings, more leverage, higher sd of dividends, more exposure to default risk, more irreversible capital (so hard to cut back expenses in recessions), and a fewer capital options, and they tend to do very poorly in financial crises,...
by larryswedroe
Sat Apr 12, 2014 2:03 pm
 
Forum: Investing - Theory, News & General
Topic: Can I get some alpha? (DFA / Wealthfront)
Replies: 58
Views: 2951

Re: Can I get some alpha? (DFA / Wealthfront)

steve
FWIW IMO you should have a very good idea of whether the premiums should show up, though not with certainty, in same way you should have good idea if equity premium will show up but not certainty.
The value premium is just as persistent and pervasive as the equity premium.
Best wishes
Larry
by larryswedroe
Fri Apr 11, 2014 7:10 pm
 
Forum: Investing - Theory, News & General
Topic: Can I get some alpha? (DFA / Wealthfront)
Replies: 58
Views: 2951

Re: Can I get some alpha? (DFA / Wealthfront)

Afan The Bridgeway funds I was referring to are the OMNI Small Value funds which were just introduced a few years ago. Just check the average market caps and p/b, p/e, p/cf of their funds and compare to DFSVX and then VISVX and you see huge differences, not minor (BOSVX is the non TM version) Also w...
by larryswedroe
Fri Apr 11, 2014 7:09 pm
 
Forum: Investing - Theory, News & General
Topic: Can I get some alpha? (DFA / Wealthfront)
Replies: 58
Views: 2951

Re: Can I get some alpha? (DFA / Wealthfront)

steve As I have pointed out even in this thread, the last ten years have been virtually no value premium, so you get what you expected. Just happened to be period when sg and Sv had similar returns. Now look at the 15 year data and you see DFA outperforming by about 2% a year over the full 15 years....
by larryswedroe
Fri Apr 11, 2014 2:46 pm
 
Forum: Investing - Theory, News & General
Topic: Can I get some alpha? (DFA / Wealthfront)
Replies: 58
Views: 2951

Re: Can I get some alpha? (DFA / Wealthfront)

few thoughts First, passive funds should have alphas close to zero, so that's not unexpected Second, if you believe the value premium is a free lunch (behavioral story) then you should load up on value, getting the higher returns without more risk. If you believe it's even a free stop at dessert tra...
by larryswedroe
Fri Apr 11, 2014 9:00 am
 
Forum: Investing - Theory, News & General
Topic: Can I get some alpha? (DFA / Wealthfront)
Replies: 58
Views: 2951

Re: A Bubble in Value Stocks?

Few thoughts First some indices split things in half, but that's not by market cap, it's by stocks. So like top 250 of the S&P is S&P growth and bottom half value. But by market cap it's obviously more loaded to growth. Second many indices split value by top 30% and bottom 30% with middle 40...
by larryswedroe
Fri Apr 11, 2014 8:41 am
 
Forum: Investing - Theory, News & General
Topic: A Bubble in Value Stocks?
Replies: 31
Views: 2466
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