Search found 1213 matches

by Random Walker
Fri Sep 23, 2016 10:18 am
Forum: Investing - Theory, News & General
Topic: Is Momentum really dead?
Replies: 3
Views: 519

Re: Is Momentum really dead?

Hi Larry, Thanks for the article. Could you perhaps compare / contrast CS Momentum v. TS Momentum for us? Definitions, Historical returns, correlations to other factors, correlations to each other. Is one a better diversifier than the other? When you say TS is absolute return strategy, you simply me...
by Random Walker
Wed Sep 21, 2016 2:03 pm
Forum: Investing - Theory, News & General
Topic: A look at the research and evidence on time-series MOM
Replies: 62
Views: 3455

Re: A look at the research and evidence on time-series MOM

Hi Larry, Seems like lots of new diversifiers coming out. QSPRX & AQMIX seem like very good ones. I believe they belong in tax advantaged space. Other potentially good diversifiers such as CCFs and REITs also probably best in tax advantaged space. Separate from issues of current valuations and m...
by Random Walker
Tue Sep 20, 2016 8:24 pm
Forum: Investing - Theory, News & General
Topic: Small Cap Premium
Replies: 11
Views: 1487

Re: Small Cap Premium

Eric 3232, You are referring to volatility drag, which I think is a huge issue. But I think volatility drag is relevant at the portfolio level. At the individual asset class level I think the average annual returns ( and SD) are meaningful. It gives you a sense of the expected premium over market. I...
by Random Walker
Mon Sep 19, 2016 7:06 pm
Forum: Investing - Theory, News & General
Topic: A new study on MOM and recent returns, disappearing premium or lull?
Replies: 13
Views: 1423

Re: A new study on MOM and recent returns, disappearing premium or lull?

For me the take away is the importance of diversifying across the factors. The low / negative correlation between the factors should hopefully help the investor stick to plan when any one factor underperforms for an extended period of time.

Dave
by Random Walker
Mon Sep 19, 2016 6:15 pm
Forum: Investing - Theory, News & General
Topic: A new study on MOM and recent returns, disappearing premium or lull?
Replies: 13
Views: 1423

Re: A new study on MOM and recent returns, disappearing premium or lull?

Extremely worthwhile chart in the article showing the frequency of underperformance of each of the well established factors for various periods of time. I tried to copy the chart, but couldn't figure out how to do it. It's an excellent reminder to stay the course and to consider diversifying across ...
by Random Walker
Sun Sep 18, 2016 9:00 am
Forum: Investing - Theory, News & General
Topic: A look at the research and evidence on time-series MOM
Replies: 62
Views: 3455

Re: A look at the research and evidence on time-series MOM

Larry,
How correlated are time series and cross sectional momentum? Any chance funds with momentum screens would change to time series? Would they want to? Thanks,

Dave
by Random Walker
Sat Sep 17, 2016 9:57 pm
Forum: Investing - Theory, News & General
Topic: Are REITs Out The Window For Us Factor Junkies?
Replies: 12
Views: 1862

Re: Are REITs Out The Window For Us Factor Junkies?

I'm a huge EMH believer. I do believe in the solid risk stories and I'm beginning to believe that there are some behavioral stories that won't be arbitraged away. Trouble is every bit of added tilt and complexity come at increased cost!

Dave
by Random Walker
Sat Sep 17, 2016 9:12 pm
Forum: Investing - Theory, News & General
Topic: Are REITs Out The Window For Us Factor Junkies?
Replies: 12
Views: 1862

Re: Are REITs Out The Window For Us Factor Junkies?

So, for now, I'm sticking to my IPS and buying small slices of all of my asset classes (including REITs) and whistling past this graveyard. At least for now it strikes me that inaction is the smartest thing to do because nobody knows nothing. Don't just do something, stand there! Inaction is most o...
by Random Walker
Sat Sep 17, 2016 9:02 pm
Forum: Investing - Theory, News & General
Topic: Are REITs Out The Window For Us Factor Junkies?
Replies: 12
Views: 1862

Re: Are REITs Out The Window For Us Factor Junkies?

GreatOdinsRaven, You and I are similar. I think that there is a huge difference between market timing / TAA and opportunistically making changes to asset allocation as personal circumstances change or a new investment vehicle comes around. For example, hard to argue against moving towards weighting ...
by Random Walker
Sat Sep 17, 2016 6:50 pm
Forum: Investing - Theory, News & General
Topic: A look at the research and evidence on time-series MOM
Replies: 62
Views: 3455

Re: A look at the research and evidence on time-series MOM

Lack-ey,
Market beta would pretty much be constant. The fund would be fully invested in equities all the time, just like current DFA funds. Simply don't buy equities with negative momentum, and hold equities with positive momentum via hold ranges.

Dave
by Random Walker
Sat Sep 17, 2016 5:32 pm
Forum: Investing - Theory, News & General
Topic: A look at the research and evidence on time-series MOM
Replies: 62
Views: 3455

Re: A look at the research and evidence on time-series MOM

Lack_ey,
Can you explain further why you think a long only can better incorporate cross sectional versus time series? Seems to me that screening out negative TS momentum and having hold ranges could accomplish the task in a long only fund.

Dave
by Random Walker
Sat Sep 17, 2016 3:19 pm
Forum: Investing - Theory, News & General
Topic: Are REITs Out The Window For Us Factor Junkies?
Replies: 12
Views: 1862

Re: Are REITs Out The Window For Us Factor Junkies?

I agree with both of you, recent REIT performance has been great, and future expected returns have to be lower. I'm not a market timer either. That being said, if one is pondering making rational changes to the asset allocation for other reasons, makes sense to do it at a time when the change involv...
by Random Walker
Sat Sep 17, 2016 10:48 am
Forum: Investing - Theory, News & General
Topic: Are REITs Out The Window For Us Factor Junkies?
Replies: 12
Views: 1862

Are REITs Out The Window For Us Factor Junkies?

I was pondering my substantially torqued portfolio. The newest factor funds that give long short exposure across asset classes to momentum, defensive, value, carry should be in tax advantaged space. In the past we have all viewed REITs as pretty good diversifiers, but they are equities nonetheless. ...
by Random Walker
Sat Sep 17, 2016 9:06 am
Forum: Investing - Theory, News & General
Topic: Pay mortgage down (PMI) or invest
Replies: 33
Views: 1747

Re: Pay mortgage down (PMI) or invest

Two points
1. The mortgage payoff is a guaranteed risk free return.
2. I have found from a psychological point of view, paying off mortgage helped strengthen my psychological fortitude to stick to a more aggressive AA.

Dave
by Random Walker
Sat Sep 17, 2016 1:43 am
Forum: Investing - Theory, News & General
Topic: A look at the research and evidence on time-series MOM
Replies: 62
Views: 3455

Re: A look at the research and evidence on time-series MOM

Is time series momentum newly discovered? Is it possible the long equity funds that screen for momentum might change to time series momentum screen from cross sectional?
Thanks,

Dave
by Random Walker
Fri Sep 16, 2016 7:18 pm
Forum: Investing - Theory, News & General
Topic: A look at the research and evidence on time-series MOM
Replies: 62
Views: 3455

Re: A look at the research and evidence on time-series MOM

Hi Larry,
Do the DFA funds screen for cross sectional momentum rather than time series? How different are time series and cross sectional. How correlated? Is it worthwhile to add time series momentum fund to a portfolio of funds that screen for cross sectional?
Thanks,

Dave
by Random Walker
Tue Sep 13, 2016 8:54 pm
Forum: Investing - Theory, News & General
Topic: "Factor investing"
Replies: 192
Views: 12097

Re: "Factor investing"

Kolea, You're working way too hard on this. The small and value premia are quite straightforward and intuitive. A Nobel prize was awarded for the following concept. The expected return on an investment is equal to the business' cost of capital. Now if you were lending money, would you charge the sam...
by Random Walker
Tue Sep 13, 2016 1:27 pm
Forum: Investing - Theory, News & General
Topic: projected returns
Replies: 11
Views: 912

Re: projected returns

I liked the Asness articles. They use an average of E/P and DDM. Their projections for real returns are:
US Japan equity 4%
EUR Developed Canada 5%
EM Australia >6%

For long only portfolios tilted he adds about 1% to above numbers

US Treasury 10 year bonds 0.5%

Dave
by Random Walker
Tue Sep 13, 2016 12:03 pm
Forum: Investing - Theory, News & General
Topic: "Factor investing"
Replies: 192
Views: 12097

Re: "Factor investing"

Kolea, No differences of opinion. The factors are defined as long short portfolios. About half the premium comes from the long side and half comes from the short side. Most Bogleheads are long only investors and can get significant factor exposure but not the deepest of exposures. By the way, this i...
by Random Walker
Tue Sep 13, 2016 9:37 am
Forum: Investing - Theory, News & General
Topic: Best books [on investing strategy]
Replies: 26
Views: 2175

Re: Best books [on investing strategy]

I'm a big fan of Ellis' Winning The Loser's Game. Don't think that book gets mentioned often enough.

Dave
by Random Walker
Tue Sep 13, 2016 9:19 am
Forum: Investing - Theory, News & General
Topic: "Factor investing"
Replies: 192
Views: 12097

Re: "Factor investing"

I think the theoretical argument for saying a TSM fund is on the efficient frontier is that any collection of stocks will become more efficient if another stock is added to the basket. Thus owning the universe of stocks becomes definitionally optimally efficient. But I believe investing has moved be...
by Random Walker
Tue Sep 13, 2016 8:56 am
Forum: Investing - Theory, News & General
Topic: "Factor investing"
Replies: 192
Views: 12097

Re: "Factor investing"

Long invest, Perhaps I am a bit naive, but I think parts of your post are incorrect and too cynical. Regarding DFA. The advisors are separate from the fund company and the fund company does not in any way benefit from the advisor fee that I know of. The DFA funds are formulaic passive. There is no m...
by Random Walker
Mon Sep 12, 2016 8:35 pm
Forum: Investing - Theory, News & General
Topic: "Factor investing"
Replies: 192
Views: 12097

Re: "Factor investing"

Investor guy, I'm not much beyond you, but let me give you my take on the factor thing. The point of the Fama-French work is that the size and value factors are unique and different from the market factor. By looking for example at the return of a portfolio where value stocks are purchased and growt...
by Random Walker
Mon Sep 12, 2016 8:47 am
Forum: Investing - Theory, News & General
Topic: "Factor investing"
Replies: 192
Views: 12097

Re: "Factor investing"

I disagree with the idea that TSM cannot be bid up the way an individual asset class can be. First of all I do think an entire stock market can be bid up as more people enter the market. Remember 2000 when waitresses and taxi drivers were giving stock tips? Secondly, TSM is dominated by Large Growth...
by Random Walker
Mon Sep 12, 2016 8:42 am
Forum: Investing - Theory, News & General
Topic: An "out of sample" test of two specific factor-based portfolios published pre-2008
Replies: 76
Views: 4910

Re: An "out of sample" test of two specific factor-based portfolios published pre-2008

Hi Larry,
When you refer to increasing exposure to term risk, how far out are you talking? Thanks,

Dave
by Random Walker
Sat Sep 10, 2016 7:58 pm
Forum: Investing - Theory, News & General
Topic: "Factor investing"
Replies: 192
Views: 12097

Re: "Factor investing"

I tilt, and I think it's fair to say that I don't depend on data mining or performance chasing. One shouldn't tilt if that is their only rationale. To tilt with conviction, one needs to look forward with a steadfast belief in a risk or persistent behavioral story. The data though is quite powerful t...
by Random Walker
Sat Sep 10, 2016 5:28 pm
Forum: Investing - Theory, News & General
Topic: "Factor investing"
Replies: 192
Views: 12097

Re: "Factor investing"

I think the reference to "buy many haystacks rather than just one haystack" really summarizes the distinction between the TSMers and the Tilters.

Dave
by Random Walker
Sat Sep 10, 2016 3:26 pm
Forum: Investing - Theory, News & General
Topic: Best books [on investing strategy]
Replies: 26
Views: 2175

Re: Best books

HomoLudens,
Maybe I'll go back and read it piecemeal as you suggest. I believe Larry Swedroe has said that he thinks it's the single best book currently on modern financial thinking. I even have 6% in QSPIX and haven't been able to get through the book yet :-)

Dave
by Random Walker
Sat Sep 10, 2016 2:48 pm
Forum: Investing - Theory, News & General
Topic: "Factor investing"
Replies: 192
Views: 12097

Re: "Factor investing"

No one will ever know where the efficient frontier is. It will always depend on past time period chosen and we invest looking forward. But we can increase the likelihood that we are close to it by multi asset class investing / diversifying across sources of return.

Dave
by Random Walker
Sat Sep 10, 2016 11:47 am
Forum: Investing - Theory, News & General
Topic: Best books [on investing strategy]
Replies: 26
Views: 2175

Re: Best books

I liked Maldebrot's book too. I'm sort of an investment book junkie; I've pretty much read all of the ones discussed on this site. But have to admit, I've picked up Illmanen's book twice and just haven't been able to get myself through it.

Dave
by Random Walker
Sat Sep 10, 2016 11:45 am
Forum: Investing - Theory, News & General
Topic: Do you think about volatility drag on your portfolio?
Replies: 51
Views: 2515

Re: Do you think about volatility drag on your portfolio?

Gray fox, I agree with your bell curve above. But a typical investor can keep the mean expected return the same and decrease the variance by diversifying across sources of return. Isn't it likely worthwhile to give up the right tail hope to avoid the left tail risk. Making the bell curve skinnier by...
by Random Walker
Sat Sep 10, 2016 11:38 am
Forum: Investing - Theory, News & General
Topic: Best books [on investing strategy]
Replies: 26
Views: 2175

Re: Best books

The two books that launched me on passive investing are Bogle's Common Sense On Mutual Funds and Bernstein's Intelligent Asset Allocator (I like it more than 4'Pillars). The first book I recommend to personal friends now is Swedroe's Wise Investing Made Simple. Each chapter is a 2-3 page story with ...
by Random Walker
Sat Sep 10, 2016 11:26 am
Forum: Investing - Theory, News & General
Topic: "Factor investing"
Replies: 192
Views: 12097

Re: "Factor investing"

Paul, There is a tremendous amount of wisdom in your "good enough". Reminds me of a story I read in one of my investing books, probably Bernstein or Swedroe, where a guy who had retired to Boca Raton from the cold north east was being interviewed. He was asked how his investments had done ...
by Random Walker
Sat Sep 10, 2016 10:12 am
Forum: Investing - Theory, News & General
Topic: Diversify Internationally Using Fundamental Indexation?
Replies: 10
Views: 1054

Re: Diversify Internationally Using Fundamental Indexation?

Think I have read that International Small Value is an even better diversifier than Emerging Market for a US heavy investor

Dave
by Random Walker
Thu Sep 08, 2016 8:54 pm
Forum: Investing - Theory, News & General
Topic: Do you think about volatility drag on your portfolio?
Replies: 51
Views: 2515

Re: Do you think about volatility drag on your portfolio?

Kolea,
Volatility drag is not a red herring at all! You're talking about individual fund statistics. I'm talking about how funds act as components of a portfolio. How they mix in the portfolio determines how close the CAGR is to the weighted average return of the components.

Dave
by Random Walker
Thu Sep 08, 2016 3:49 pm
Forum: Investing - Theory, News & General
Topic: Interesting new study on time series momentum and crises
Replies: 39
Views: 2284

Re: Interesting new study on time series momentum and crises

I initially became a tilter because I intuitively believed the risk stories associated with small and value. As I've gained knowledge and experience, I've gained more faith in the potential for behavioral anomalies. I do think some human characteristics can lead to persistent mispricings, and moreov...
by Random Walker
Thu Sep 08, 2016 2:38 pm
Forum: Investing - Theory, News & General
Topic: Interesting new study on time series momentum and crises
Replies: 39
Views: 2284

Re: Interesting new study on time series momentum and crises

Hi GOR, I'm certainly not Larry, but heck I'll give you my 2 cents anyways. I do think small allocations to some portfolio components can make sense. The contribution of a potential portfolio addition depends on expected return, volatility, correlations to other portfolio components, and of course c...
by Random Walker
Thu Sep 08, 2016 7:29 am
Forum: Investing - Theory, News & General
Topic: Do you think about volatility drag on your portfolio?
Replies: 51
Views: 2515

Re: Do you think about volatility drag on your portfolio?

Two portfolios can have the same expected return. One may be a TSM/TBM type portfolio. The other may be tilted to factors with increased expected returns on the equity side but have bigger dose of safer bonds. The second portfolio would be more diversified according to drivers of return.

Dave
by Random Walker
Thu Sep 08, 2016 1:02 am
Forum: Investing - Theory, News & General
Topic: Do you think about volatility drag on your portfolio?
Replies: 51
Views: 2515

Re: Do you think about volatility drag on your portfolio?

Nedsaid,
I'm sure you'd agree that we need to expect that in times of crisis correlations go to 1. That's where highest quality and short duration fixed income help most. We expect correlations to vary over time too.

Dave
by Random Walker
Thu Sep 08, 2016 12:35 am
Forum: Investing - Theory, News & General
Topic: Do you think about volatility drag on your portfolio?
Replies: 51
Views: 2515

Re: Do you think about volatility drag on your portfolio?

Lapuce,
I'm not super strong on math and stats. I think the equation I stated above is an approximation from some much more serious math. I saw it in Andrew Ang's Asset Management: A Systematic Approach to Factor Investing p.145-146. Need to read footnotes at bottom too.

Dave
by Random Walker
Thu Sep 08, 2016 12:24 am
Forum: Investing - Theory, News & General
Topic: Do you think about volatility drag on your portfolio?
Replies: 51
Views: 2515

Re: Do you think about volatility drag on your portfolio?

Nedsaid, Let's consider two portfolios with the same expected return. The first portfolio is say 80/20 TSM/TBM. The second portfolio is diversified across equity asset classes with same and higher expected return than TSM and the % bonds is increased to keep the expected return same as our TSM/TBM 8...
by Random Walker
Wed Sep 07, 2016 10:12 pm
Forum: Investing - Theory, News & General
Topic: Do you think about volatility drag on your portfolio?
Replies: 51
Views: 2515

Re: Do you think about volatility drag on your portfolio?

Kolea, NO! TSM has all stocks but it has no net exposure to the risk factors of size and price. The exposure to small is exactly offset by the exposure to large and the exposure to value is exactly offset by the exposure to growth. Size and value are weakly or non correlated to market and to each ot...
by Random Walker
Wed Sep 07, 2016 9:51 pm
Forum: Investing - Theory, News & General
Topic: Do you think about volatility drag on your portfolio?
Replies: 51
Views: 2515

Re: Do you think about volatility drag on your portfolio?

NedSaid,
Isn't the sequence of returns risk just an example of the volatility drag issue on steroids? I think the improved efficiency of diversification across sources of return is amplified during withdrawal phase.

Dave
by Random Walker
Wed Sep 07, 2016 9:40 pm
Forum: Investing - Theory, News & General
Topic: Do you think about volatility drag on your portfolio?
Replies: 51
Views: 2515

Re: Do you think about volatility drag on your portfolio?

Tyler, What you described was the surprising finding for me when I had a Monte Carlo simulation performed. Although a higher equity allocation will yield a higher mean terminal value, a lower equity allocation may have higher likelihood of yielding a result where one does not outlive their money. Dave
by Random Walker
Wed Sep 07, 2016 8:59 pm
Forum: Investing - Theory, News & General
Topic: Do you think about volatility drag on your portfolio?
Replies: 51
Views: 2515

Re: Do you think about volatility drag on your portfolio?

Kolea, As I expect you've read, TSM is really only exposed to one risk factor, beta. Do you still believe it's maximally diverse? What matters is the behavior of the portfolio as a whole, and the potential additional benefit of an asset class to a portfolio depends on its expected returns, volatilit...
by Random Walker
Wed Sep 07, 2016 7:11 pm
Forum: Investing - Theory, News & General
Topic: Do you think about volatility drag on your portfolio?
Replies: 51
Views: 2515

Re: Do you think about volatility drag on your portfolio?

Patrick13, Strongly recommend you read Gibson's short paper. Also Larry's short 3 page essay: Effective Diversification in a 3 Factor World. These short reads are some of the very most productive investment reading I have done. Here's the link to Larry's article. http://thebamalliance.com/pdfs/Effec...
by Random Walker
Wed Sep 07, 2016 6:47 pm
Forum: Investing - Theory, News & General
Topic: Do you think about volatility drag on your portfolio?
Replies: 51
Views: 2515

Do you think about volatility drag on your portfolio?

When it came to me diving into the world of tilting / diversifying across risk factors, a big reason for me was volatility drag. The geometric mean (annualized) return of a portfolio is always less than the average annual return. This gap is caused by volatility, and the greater the volatility the g...
by Random Walker
Wed Sep 07, 2016 1:08 pm
Forum: Investing - Theory, News & General
Topic: Source for yield curves, specifically munis v. Treasuries
Replies: 4
Views: 267

Re: Source for yield curves, specifically munis v. Treasuries

Was hoping to see graphs of the curves so I can visualize the changes in slope. Thanks,

Dave
by Random Walker
Wed Sep 07, 2016 12:38 pm
Forum: Investing - Theory, News & General
Topic: Source for yield curves, specifically munis v. Treasuries
Replies: 4
Views: 267

Source for yield curves, specifically munis v. Treasuries

Does anyone know a good source on the Internet for me to see current municipal bond yield curves? Thanks

Dave
by Random Walker
Wed Sep 07, 2016 9:39 am
Forum: Investing - Theory, News & General
Topic: Interesting new study on time series momentum and crises
Replies: 39
Views: 2284

Re: Interesting new study on time series momentum and crises

Hi Larry, Would you mind further distinguishing cross sectional momentum from time series momentum? Is cross sectional momentum as powerful as time series? Which type of momentum is used in the screens of various funds. Are they all cross sectional except for the one AQR fund that uses time series? ...

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