Search found 15093 matches

by larryswedroe
Wed Jan 18, 2017 7:16 pm
Forum: Investing - Theory, News & General
Topic: Do you always get a small-cap premium in periods of expansionary monetary policy?
Replies: 12
Views: 607

Re: Do you always get a small-cap premium in periods of expansionary monetary policy?

quark Correct was just giving a specific example using that one measure of risk. Note that if you agree with that then the most diversified portfolio clearly is not TSM but one that has other sources of risk and return other than beta with returns that are generally uncorrelated, thus adding diversi...
by larryswedroe
Wed Jan 18, 2017 6:54 pm
Forum: Investing - Theory, News & General
Topic: Do you always get a small-cap premium in periods of expansionary monetary policy?
Replies: 12
Views: 607

Re: Do you always get a small-cap premium in periods of expansionary monetary policy?

Lackey
Agree, and in fact if you think the markets are efficient than all investments should be expected to have same SR (if vol is the measure of risk) --that's b basic arbitrage pricing theory.
Larry
by larryswedroe
Wed Jan 18, 2017 6:27 pm
Forum: Investing - Theory, News & General
Topic: Do you always get a small-cap premium in periods of expansionary monetary policy?
Replies: 12
Views: 607

Re: Do you always get a small-cap premium in periods of expansionary monetary policy?

Nisiprius,after bit of thought, hate to accuse you of data mining but why did you choose to not include 2009 when monetary policy was very easy and small premium was very high, with even NAESX outperforming S&P by almost 10%. Curious omission. Here's another look 2009-2016, S&P 14.5 vs DFA s...
by larryswedroe
Wed Jan 18, 2017 5:03 pm
Forum: Investing - Theory, News & General
Topic: Do you always get a small-cap premium in periods of expansionary monetary policy?
Replies: 12
Views: 607

Re: Do you always get a small-cap premium in periods of expansionary monetary policy?

Nisiprius First, as you noted the authors didn't say that there was always a small cap premium in expansionary times, only that there wasn't one in times of tightness. I would expect same finding directionally for value stocks for same reasons. Second, and here I am just attempting to explain in hin...
by larryswedroe
Wed Jan 18, 2017 2:51 pm
Forum: Investing - Theory, News & General
Topic: The effect of Scale and Scope on active Management
Replies: 0
Views: 106

The effect of Scale and Scope on active Management

Both have negative effects, and even the growth of the industry has negative effect All help explain why there's little persistence of performance.[url] http://www.etf.com/sections/index-investor-corner/swedroe-scales-effect-active-performance[/url] BTW- just finished an analysis of DFA and Vanguard...
by larryswedroe
Wed Jan 18, 2017 2:47 pm
Forum: Investing - Theory, News & General
Topic: "The Undoing Project," by Michael Lewis
Replies: 8
Views: 1490

Re: "The Undoing Project," by Michael Lewis

I second Howard's recommendation as I just finished the book last night. The insights are great into how even when we know there are biases we fall prey to them, even Kahneman admitted he did. And it's fascinating relationship between Tversky and Kahneman, Their work led to the development of the wh...
by larryswedroe
Wed Jan 18, 2017 11:18 am
Forum: Investing - Theory, News & General
Topic: Factor-Diversified Portfolio
Replies: 99
Views: 5589

Re: Factor-Diversified Portfolio

First, as CULATER showed, and I have explained, you can tilt with very simple portfolios. Second someone asked about BRSIX, but don't remember if it was this thread, but here's an answer As would expect for a fund like this it has higher loadings on beta, size and value. The fund does add a liquidit...
by larryswedroe
Wed Jan 18, 2017 8:56 am
Forum: Investing - Theory, News & General
Topic: Using "worst case" portfolio results to help determine asset allocation - yea or nay?
Replies: 16
Views: 971

Re: Using "worst case" portfolio results to help determine asset allocation - yea or nay?

BTW- the worst drawdown was far worse than 37%, in 2008 bear from top to bottom was more like 60%, and in 2000-02 was closer to 50% if memory serves. As to your question, while you certainly should CONSIDER the worst case, that doesn't imply that it alone should determine you AA. What you need to co...
by larryswedroe
Wed Jan 18, 2017 8:50 am
Forum: Investing - Theory, News & General
Topic: Factor-Diversified Portfolio
Replies: 99
Views: 5589

Re: Factor-Diversified Portfolio

chatbotte Well complex question. Of course not everyone can tilt to value or small, there must be some that tilt the other way for you to be able to tilt toward a factor. In my book The Only Guide You'll Ever Need to The Right Financial Plan I provide questions and answers as to which investors shou...
by larryswedroe
Tue Jan 17, 2017 10:10 pm
Forum: Investing - Theory, News & General
Topic: QSPIX - thoughts on interesting fund
Replies: 1128
Views: 151406

Re: QSPIX - thoughts on interesting fund

nisiprius Sure you get the investment porn crap like smart beta, but that's not what is discussed here. Here we talk about taking different types of risk with low correlations and premiums that have been persistent, pervasive, robust, implementable and have intuitive reasons for having confidence th...
by larryswedroe
Tue Jan 17, 2017 12:59 pm
Forum: Investing - Theory, News & General
Topic: QSPIX - thoughts on interesting fund
Replies: 1128
Views: 151406

Re: QSPIX - thoughts on interesting fund

I just find it very strange how confidently some people are posting "Here's a free lunch."


Please show an actual quote where someone said this about alternatives

Larry
by larryswedroe
Tue Jan 17, 2017 12:57 pm
Forum: Investing - Theory, News & General
Topic: short sellers provide valuable signals that long only funds can use
Replies: 4
Views: 491

Re: short sellers provide valuable signals that long only funds can use

yes it wasn't an "academic paper" per se. And yes there are papers on short sellers and the information they provide and DFA and Bridgeway as well use that information to delay buys for example. And same thing found on corporate bonds by the way. And here's a link to one such paper M.D. Be...
by larryswedroe
Tue Jan 17, 2017 11:34 am
Forum: Investing - Theory, News & General
Topic: short sellers provide valuable signals that long only funds can use
Replies: 4
Views: 491

Re: short sellers provide valuable signals that long only funds can use

Matto
here's the link but I believe it's available only to professionals so might not be able to access
https://my.dimensional.com/insight/issue_briefs/165030/
Larry
by larryswedroe
Tue Jan 17, 2017 11:12 am
Forum: Investing - Theory, News & General
Topic: QSPIX - thoughts on interesting fund
Replies: 1128
Views: 151406

Re: QSPIX - thoughts on interesting fund

Why own equities, because market beta is an independent source of risk and return that's uncorrelated with the sources of risk/return of QSPRX. Also as triceratops noted there's the tax efficiency issue. Higher bracket investors would not want to own a tax inefficient fund in taxable account general...
by larryswedroe
Tue Jan 17, 2017 11:11 am
Forum: Investing - Theory, News & General
Topic: Factor-Diversified Portfolio
Replies: 99
Views: 5589

Re: Factor-Diversified Portfolio

beta If have a value loading of a fund at say .6 and equity is 30% than value loading of the PORTFOLIO will be about .2. And btw your beta loading will be about .3 (while the funds's betas will be about 1). And with intermediate bonds you'll get loading on term of about .27 and with 70% you'll get l...
by larryswedroe
Tue Jan 17, 2017 9:50 am
Forum: Investing - Theory, News & General
Topic: short sellers provide valuable signals that long only funds can use
Replies: 4
Views: 491

short sellers provide valuable signals that long only funds can use

http://www.etf.com/sections/index-investor-corner/swedroe-dont-scorn-short-seller

Another example of how one can use the findings from academic research to improve performance

Hope you find it of interest
Larry
by larryswedroe
Mon Jan 16, 2017 8:38 pm
Forum: Investing - Theory, News & General
Topic: Factor-Diversified Portfolio
Replies: 99
Views: 5589

Re: Factor-Diversified Portfolio

selters
In terms of factor exposure you would have gained exposure to the size factor but not any other factor. To be more diversified you could substitute small and mid value for the blend funds and own TSM instead of large
larry
by larryswedroe
Mon Jan 16, 2017 7:55 pm
Forum: Investing - Theory, News & General
Topic: Factor-Diversified Portfolio
Replies: 99
Views: 5589

Re: Factor-Diversified Portfolio

Theorectical no problem, was just curious since you didn't say what you disagreed with and didn't address it to anyone
Larry
by larryswedroe
Mon Jan 16, 2017 7:26 pm
Forum: Investing - Theory, News & General
Topic: Factor-Diversified Portfolio
Replies: 99
Views: 5589

Re: Factor-Diversified Portfolio

theorectical, what exactly are you disagreeing with?
Note that I do agree that it's just as important, if not more so, to avoid the negative side of some of these factors/anomalies than it is to get exposed to the positive side.
Larry
by larryswedroe
Mon Jan 16, 2017 7:23 pm
Forum: Investing - Theory, News & General
Topic: The gulf between MOM fund returns and MOM factor returns
Replies: 30
Views: 1613

Re: The gulf between MOM fund returns and MOM factor returns

re capacity Capacity depends on willingness to accept random tracking error and be a patient trader to avoid or minimize market impact costs by using algorithmic programs. In actual live test of millions of trades study found that using patient trading costs were only about 1/6 of the prior estimate...
by larryswedroe
Mon Jan 16, 2017 6:03 pm
Forum: Investing - Theory, News & General
Topic: Factor-Diversified Portfolio
Replies: 99
Views: 5589

Re: Factor-Diversified Portfolio

Stlutz Well if you took the time to read the literature on value and growth you would find both risk based explanations (I've provided many here many times) as well as behavioral ones. The risk ones are clear and simple to understand like value stocks have more volatile earnings and more debt and mo...
by larryswedroe
Mon Jan 16, 2017 5:28 pm
Forum: Investing - Theory, News & General
Topic: Factor-Diversified Portfolio
Replies: 99
Views: 5589

Re: Factor-Diversified Portfolio

stlutz First, one should only care about priced factors, there is no reason to consider non priced factors. So that should end that discussion. If not, I have no interest in continuing it anyway. Second, investing is about putting ODDS in your favor based on evidence and logic since we cannot know f...
by larryswedroe
Mon Jan 16, 2017 3:59 pm
Forum: Investing - Theory, News & General
Topic: Factor-Diversified Portfolio
Replies: 99
Views: 5589

Re: Factor-Diversified Portfolio

stlutz Of course your extreme examples aren't more diversified (and Texas isn't a factor that would logically have a premium and neither is oil, so the whole analogy falls apart right from the start), but when you own say 4 thousand stocks in a globally diversified portfolio, across all industries a...
by larryswedroe
Mon Jan 16, 2017 3:47 pm
Forum: Investing - Theory, News & General
Topic: Factor-Diversified Portfolio
Replies: 99
Views: 5589

Re: Factor-Diversified Portfolio

chatbotte No it is by definition, how the factors are constructed. And Japan is the perfect example of why one should consider diversifying across factors, not just geography, as in their case beta has had negative premium for almost 30 years, showing it can happen anywhere, to any factor. As to if ...
by larryswedroe
Mon Jan 16, 2017 1:55 pm
Forum: Investing - Theory, News & General
Topic: Factor-Diversified Portfolio
Replies: 99
Views: 5589

Re: Factor-Diversified Portfolio

Walletless
Once you move away from TSM you are diversifying the portfolio in the sense of diversification across factors--here you have TERM exposure, plus REIT exposure, plus size and value exposure. And it's certainly diversified from geographic perspective
Larry
by larryswedroe
Mon Jan 16, 2017 1:53 pm
Forum: Investing - Theory, News & General
Topic: Factor-Diversified Portfolio
Replies: 99
Views: 5589

Re: Factor-Diversified Portfolio

stlutz I have explained this point MANY times, over and over again. Whether something is diversified more or less can depend on one's perspective. Thus there should be no confusion at all. For example, one could argue that the S&P 500 which is about 80% of the TSM is less diversified than say VI...
by larryswedroe
Mon Jan 16, 2017 1:44 pm
Forum: Investing - Theory, News & General
Topic: The gulf between MOM fund returns and MOM factor returns
Replies: 30
Views: 1613

Re: The gulf between MOM fund returns and MOM factor returns

Garland, I'm not Robert but but isn't having a large and persistent negative alpha the same as saying that the 4 factor model, at least as practiced in this case, does a poor job of projecting returns. This is not correct The r-squared tells you if the model is doing a good job of explaining returns...
by larryswedroe
Mon Jan 16, 2017 11:00 am
Forum: Investing - Theory, News & General
Topic: Market Sentiment: How do we measure
Replies: 5
Views: 324

Re: Market Sentiment: How do we measure

Two researchers, Malcolm Baker and Jeffrey Wurgler, have constructed an investor sentiment index based on the six measures: trading volume as measured by NYSE turnover; the dividend premium (the difference between the average market-to-book ratio of dividend payers and non-payers); the closed-end fu...
by larryswedroe
Mon Jan 16, 2017 10:14 am
Forum: Investing - Theory, News & General
Topic: Factor-Diversified Portfolio
Replies: 99
Views: 5589

Re: Factor-Diversified Portfolio

chatbotte First, historically it's been FAR better. Try reading Reducing the Risk of Black Swans. Second, leverage only works in that model when you can borrow at the riskless rate (which no investor can do) and you don't have to worry about not only the cost of margin, but also the risk of margin c...
by larryswedroe
Mon Jan 16, 2017 10:04 am
Forum: Investing - Theory, News & General
Topic: The gulf between MOM fund returns and MOM factor returns
Replies: 30
Views: 1613

Re: The gulf between MOM fund returns and MOM factor returns

Nisprius First, yes it was Fama he was head of research in 2003 when DFA began screening for negative MOM, he also stated MOM was the single biggest problem for the EMH. And today DFA still screens for negative MOM. So I think it's fair to say he threw in the towel. Second, there are competing model...
by larryswedroe
Mon Jan 16, 2017 9:03 am
Forum: Investing - Theory, News & General
Topic: Factor-Diversified Portfolio
Replies: 99
Views: 5589

Re: Factor-Diversified Portfolio

chatbotte First IMO mean variance, efficient frontier models are just waste of time. The reason is simple--a very small change in assumptions like return or sd or correlations can lead to massive changes in allocations. Given that the solution is broad diversification across factors that meet all th...
by larryswedroe
Mon Jan 16, 2017 8:51 am
Forum: Investing - Theory, News & General
Topic: QSPIX - thoughts on interesting fund
Replies: 1128
Views: 151406

Re: QSPIX - thoughts on interesting fund

sambb First definitely have preference for tax advantaged account unless in low bracket. If willing to use as alternative to bonds, then could consider holding in taxable as have higher expected returns IMO, but of course with higher risks (but much than with stocks). Second, it adds not just other ...
by larryswedroe
Mon Jan 16, 2017 8:46 am
Forum: Investing - Theory, News & General
Topic: The gulf between MOM fund returns and MOM factor returns
Replies: 30
Views: 1613

Re: The gulf between MOM fund returns and MOM factor returns

Nisiprius Let me suggest a different way to think about this Different fund companies use different metrics to define MOM, just as they do for value where some use only p/b and some use various combinations of p/e, p/b, p/cf, p/d and p/s. With momentum they can use various time frames such as t-12 t...
by larryswedroe
Sun Jan 15, 2017 7:36 pm
Forum: Investing - Theory, News & General
Topic: Factor-Diversified Portfolio
Replies: 99
Views: 5589

Re: Factor-Diversified Portfolio

betablocker,
My pleasure, my way of giving back.
Best wishes
Larry
by larryswedroe
Sun Jan 15, 2017 6:23 pm
Forum: Investing - Theory, News & General
Topic: Factor-Diversified Portfolio
Replies: 99
Views: 5589

Re: Factor-Diversified Portfolio

chatbotte You don't have to be willing to hold more risk, just different types of risk. And diversification view depends on how you look at it. TSM has exposure only to one source of risk, market beta, while a tilted portfolio has exposure to several. And if use the exposure to lower beta at same ti...
by larryswedroe
Sun Jan 15, 2017 3:14 pm
Forum: Investing - Theory, News & General
Topic: Factor-Diversified Portfolio
Replies: 99
Views: 5589

Re: Factor-Diversified Portfolio

Betablocker Yes you get exposure to market beta via long only funds---so a small value fund like DFSVX might have beta of 1.1. So if have 30% equities your PORTFOLIO beta exposure is .33 (if that's only equity you own), or if have 50% it's .55. My own view is that diversification of sources of risk ...
by larryswedroe
Sun Jan 15, 2017 1:00 pm
Forum: Investing - Theory, News & General
Topic: Factor-Diversified Portfolio
Replies: 99
Views: 5589

Re: Factor-Diversified Portfolio

Re Robert T's posts, as asked by LT Just briefly, I'd recommend reading all his posts as they are informative. I basically agree with all he said. My only comment really is that with value the evidence is very strong that the value premium is much stronger in small, so you have to tilt to small to g...
by larryswedroe
Sun Jan 15, 2017 12:54 pm
Forum: Investing - Theory, News & General
Topic: QSPIX - thoughts on interesting fund
Replies: 1128
Views: 151406

Re: QSPIX - thoughts on interesting fund

Random Walker
Using SD as the measure of risk market beta makes up over 85% of the risk of the typical 60/40 portfolio if using intermediate safe bonds, and even more if use shorter bonds, not 60%. That's why years like 2008 can so devastate portfolios
Larry
by larryswedroe
Sun Jan 15, 2017 12:51 pm
Forum: Investing - Theory, News & General
Topic: QSPIX - thoughts on interesting fund
Replies: 1128
Views: 151406

Re: QSPIX - thoughts on interesting fund

RT6,would be something like 50% BOSVX, 37.5% DISVX and 12.5% DFEVX, or 50% BOSVX and 50% DWUSX We use the terms RT1, 2, 3, 6 for model portfolios to roughly mean exposure to size and value factors with each RT to represent 10% loading. DFA uses CORE 1 and CORE 2 portfolios in similar way, meaning Co...
by larryswedroe
Sun Jan 15, 2017 12:49 pm
Forum: Investing - Theory, News & General
Topic: 3 Vanguard Funds That Are Taking on Water
Replies: 29
Views: 5306

Re: 3 Vanguard Funds That Are Taking on Water

This article is so bad, including plainly factually incorrect information that I am going to try and find the time to write a blog on it, in the investment porn category is what this is.
Larry
by larryswedroe
Sun Jan 15, 2017 10:56 am
Forum: Investing - Theory, News & General
Topic: Factor-Diversified Portfolio
Replies: 99
Views: 5589

Re: Factor-Diversified Portfolio

betablocker First, when screen for CS MOM you don't cancel out value exposure, but you do lower it somewhat, but without reducing expected returns. Second, managed futures can to some degree cancel it because it can be going short equities. But only about 1/3 of fund is equity related, with bonds, c...
by larryswedroe
Sun Jan 15, 2017 10:53 am
Forum: Investing - Theory, News & General
Topic: Liquidity risk/funding risk and are they rewarded
Replies: 13
Views: 771

Re: Liquidity risk/funding risk and are they rewarded

LT Absolutely not. Diversification should always be the guiding principle whenever you don't have a clear crystal ball and I've yet to find one!!! Example, today EM has much higher expected return than US and IMO likely higher SR as well. But I haven't changed my US to international to EM allocation...
by larryswedroe
Sun Jan 15, 2017 9:56 am
Forum: Investing - Theory, News & General
Topic: Liquidity risk/funding risk and are they rewarded
Replies: 13
Views: 771

Re: Liquidity risk/funding risk and are they rewarded

Dave Creating funds that invest in illiquid assets doesn't make the illiquid assets more liquid. And in fact as money flows in then the risks of big market impact costs increase as when you have bear markets and flights to liquidity you have more funds trying to rush out at the same time. Now someti...
by larryswedroe
Sun Jan 15, 2017 9:48 am
Forum: Investing - Theory, News & General
Topic: Factor-Diversified Portfolio
Replies: 99
Views: 5589

Re: Factor-Diversified Portfolio

betablocker few things, if own QSPRX then you are targeting MOM exposure in four asset classes, cross sectional MOM. If you also add, as I did, one of their managed futures funds, then you are targeting MOM and specifically time series MOM across four asset classes. If you have low equity allocation...
by larryswedroe
Sat Jan 14, 2017 8:57 pm
Forum: Investing - Theory, News & General
Topic: How Much To Tilt To Small Value?
Replies: 152
Views: 15489

Re: How Much To Tilt To Small Value?

hilink
If referring to AQR style premium, definitely not, and as I said it's not even an equity only fund with exposure to factors in bonds and commodities and currencies as well, across four factors of value, defensive (quality), MOM and carry
Larry
by larryswedroe
Sat Jan 14, 2017 5:39 pm
Forum: Investing - Theory, News & General
Topic: Liquidity risk/funding risk and are they rewarded
Replies: 13
Views: 771

Re: Liquidity risk/funding risk and are they rewarded

nedsaid The problem with that is you would need to own a fund that had ONLY patient and disciplined investors who don't panic in liquidity crisis, or be able to put up "gates" as hedge funds do There are funds like Bridgeway's Ultra small fund, which is 10th decile, but then in bear market...
by larryswedroe
Sat Jan 14, 2017 5:32 pm
Forum: Investing - Theory, News & General
Topic: How Much To Tilt To Small Value?
Replies: 152
Views: 15489

Re: How Much To Tilt To Small Value?

hilink First, it's a superior approach to use a multifactor fund instead of multiple funds that target single factors. So that's important to understand. Second, a multi-factor strategy like AQR Style Premium not only gives you exposure to four equity factors, helping to diversify sources of risk, b...
by larryswedroe
Sat Jan 14, 2017 5:30 pm
Forum: Investing - Theory, News & General
Topic: How Much To Tilt To Small Value?
Replies: 152
Views: 15489

Re: How Much To Tilt To Small Value?

GreatOdinsRaven Unfortunately no really great way to know the loadings on international. In choosing funds I would look to the weighted average market caps and prices to several value metrics (including p/cf and p/e and not just p/b) Yes selection of countries by valuations should lead to higher ret...
by larryswedroe
Sat Jan 14, 2017 10:16 am
Forum: Investing - Theory, News & General
Topic: How Much To Tilt To Small Value?
Replies: 152
Views: 15489

Re: How Much To Tilt To Small Value?

Theoretical So I just ran a 100% S&P and 50/50 SV and 5-year 40-82 S&P 12.1 and SD 17.6 50/50 FF SV and 5-year Treasury 13.1 and SD 15.0 And certainly helped with fat tail risks in 73-4, S&P lost 37%, the "Larry Portfolio" lost 17% So you chose what you thought would be an inte...
by larryswedroe
Sat Jan 14, 2017 9:19 am
Forum: Investing - Theory, News & General
Topic: How Much To Tilt To Small Value?
Replies: 152
Views: 15489

Re: How Much To Tilt To Small Value?

hilink IN the Your Complete Guide to Factor Based investing you'll find the answer to your question about horizons. Just look at the tables which show the odds of success, or odds of underperformance. No matter what the horizon, short or long, each of the factors we recommend have persistence above ...

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