Search found 13354 matches

by larryswedroe
Sat Feb 13, 2016 8:57 am
Forum: Investing - Theory, News & General
Topic: Does Ethical Investing Impact Returns
Replies: 4
Views: 340

Does Ethical Investing Impact Returns

http://mutualfunds.com/news/2016/02/09/does-ethical-based-investing-impact-returns/ A look at SRI and the pros and cons. Hope you find it helpful. And here is a related piece AdvisorPerspectives asked me to write http://www.apviewpoint.com/component/kunena/?func=view&catid=94&id=12659&I...
by larryswedroe
Fri Feb 12, 2016 6:43 pm
Forum: Investing - Theory, News & General
Topic: The Value of Low Volatility
Replies: 20
Views: 1462

Re: The Value of Low Volatility

691175002 Keep in mind that low volatility has been shown to have exposure to term risk, which certainly has been paying off over not only recent years but basically since early 80s. No prediction from me but the risk adjusted odds of term risk paying off certainly are a hell of a lot worse than the...
by larryswedroe
Fri Feb 12, 2016 5:23 pm
Forum: Investing - Theory, News & General
Topic: Nobody, and I mean nobody can predict interest rates
Replies: 12
Views: 1173

Re: Nobody, and I mean nobody can predict interest rates

Nisiprius
First, the current yield curve provides the best estimate we have of future yield curves.
Second, the market has rewarded investors for taking term risk best when the curve is steep (when people are afraid to go long, thus there is a big risk premium) and not so well when flat.

Larry
by larryswedroe
Fri Feb 12, 2016 5:19 pm
Forum: Investing - Theory, News & General
Topic: Final part of the series on small caps
Replies: 19
Views: 1076

Re: Final part of the series on small caps

Mel, by moving to midcaps you are effectively screening out those lottery stocks, without even knowing it perhaps (:-))

But that telltale chart looked funny to me so I ran some data
From 1985-November 2015 the CRSP 3-5 (midcaps) returned 12.0 and the FF Small Value Research Index returned 14.0

Larry
by larryswedroe
Fri Feb 12, 2016 5:14 pm
Forum: Investing - Theory, News & General
Topic: Final part of the series on small caps
Replies: 19
Views: 1076

Re: Final part of the series on small caps

Mel, by moving to midcaps you are effectively screening out those lottery stocks, without even knowing it perhaps (:-))
Larry
by larryswedroe
Fri Feb 12, 2016 5:12 pm
Forum: Investing - Theory, News & General
Topic: The Value of Low Volatility
Replies: 20
Views: 1462

Re: The Value of Low Volatility

steve R
Just check the p/e ratios of the low vol funds and compare them to value funds of say DFA. They used to be quite similar, no more, at last I checked
Larry
by larryswedroe
Fri Feb 12, 2016 5:11 pm
Forum: Investing - Theory, News & General
Topic: Leaving DFA advisor - should I keep DFA positions or simplify?
Replies: 17
Views: 1339

Re: Leaving DFA advisor - should I keep DFA positions or simplify?

Since someone asked me to comment, so here are some quick thoughts. Way too many funds, with actually negative implications in terms of trading costs and rebalancing costs. So I agree with the critique about a way to justify fees, and not in best interest of the investor. The core funds should be us...
by larryswedroe
Fri Feb 12, 2016 12:22 pm
Forum: Investing - Theory, News & General
Topic: The Value of Low Volatility
Replies: 20
Views: 1462

Re: The Value of Low Volatility

Re low vol perfomance, As I said low vol predicts low vol. So not surprising. But you can get there by just having lower equity allocation and screening out the bad stuff and get better returns IMO. I'd add that now you are owning relatively high priced stuff with term risk.
Larry
by larryswedroe
Fri Feb 12, 2016 12:16 pm
Forum: Investing - Theory, News & General
Topic: Final part of the series on small caps
Replies: 19
Views: 1076

Re: Final part of the series on small caps

Funds that use multiple metrics for value, such as, p/e and p/cf instead of just p/b will tilt away from the lottery tickets, as those other metrics provide exposure to the "quality" or profitability factor. So can look for funds that use such metrics. Dafuskie--don't think it's the indust...
by larryswedroe
Fri Feb 12, 2016 9:38 am
Forum: Investing - Theory, News & General
Topic: A look at the small cap premium
Replies: 34
Views: 2980

Re: A look at the small cap premium

FWIW the idea that delisting impacts the returns in meaningful way doesn't pass the smell test. The reason is simple. In a market cap weighted portfolio by the time a stock gets delisted it's weighted average impact on a broad portfolio would be virtually zero. And IMO pretty good evidence on this w...
by larryswedroe
Fri Feb 12, 2016 9:35 am
Forum: Investing - Theory, News & General
Topic: The Value of Low Volatility
Replies: 20
Views: 1462

Re: The Value of Low Volatility

Few thoughts First, it is simple for low volatility to get crowded and it already has as I have shown, with valuations rising--they used to be more value type stocks but no more Second, yes the research shows that low volatility does predict low volatility (IMO but not returns). Third, there really ...
by larryswedroe
Fri Feb 12, 2016 9:32 am
Forum: Investing - Theory, News & General
Topic: Nobody, and I mean nobody can predict interest rates
Replies: 12
Views: 1173

Re: Nobody, and I mean nobody can predict interest rates

Not exactly correct. The yield curve does provide information as to future rates. So the way to think about it is that there are no gurus who can predict more accurately than the market itself does.

Larry
by larryswedroe
Thu Feb 11, 2016 3:26 pm
Forum: Investing - Theory, News & General
Topic: The Value of Low Volatility
Replies: 20
Views: 1462

Re: The Value of Low Volatility

There's a lot of research on low vol and off top of head they also have tended to have exposure to term risk--and rates have been falling of course, value and BETTING AGAINST BETA. Once you account for these THREE, not just one, it's gone, or subsumed. Now it still might be good thing because by usi...
by larryswedroe
Thu Feb 11, 2016 9:31 am
Forum: Investing - Theory, News & General
Topic: A look at the small cap premium
Replies: 34
Views: 2980

Re: A look at the small cap premium

Printer No problem, and lackey gave you the answer. Few other thoughts. First, even if you have no difference in returns on risk-adjusted basis (which is what you should expect) one should still IMO consider including them as diversifier of the sources of risk and return. Second, as noted the "...
by larryswedroe
Wed Feb 10, 2016 5:08 pm
Forum: Investing - Theory, News & General
Topic: Factor models, efficiency & risk
Replies: 4
Views: 414

Re: Factor models, efficiency & risk

JoMoney Yes that is what I meant when I said many of the so called premiums or factors may not even have existed other than for some period tested, data mined. There has to be evidence that is both persistent and pervasive and have strong logical reasons to believe it will persist and even better if...
by larryswedroe
Wed Feb 10, 2016 5:05 pm
Forum: Investing - Theory, News & General
Topic: A look at the small cap premium
Replies: 34
Views: 2980

Re: A look at the small cap premium

printer First, you could pick any part of the 6-10 and find the same type results, but more importantly the evidence is persistent and pervasive that the size premium exists around the globe!!! And there are very simple and logical reasons to have a size premium just as there are for the equity prem...
by larryswedroe
Wed Feb 10, 2016 9:19 am
Forum: Investing - Theory, News & General
Topic: Factor models, efficiency & risk
Replies: 4
Views: 414

Re: Factor models, efficiency & risk

Mispricings, however, do vanish when discovered." There are reasons why mispricings (behavioral as opposed to risk based) can and do persist because of limits to arbitrage, costs of shorting and risks of shorting. It thus partly depends on the liquidity related to the anomaly--the lower the li...
by larryswedroe
Wed Feb 10, 2016 9:12 am
Forum: Investing - Theory, News & General
Topic: CAPM & inability to borrow at riskfree rate
Replies: 16
Views: 1144

Re: CAPM & inability to borrow at riskfree rate

chatbotte Basically correct but if can borrow long term at very low rates like on mortgage and can invest at close to the AT cost of the debt then you get cash for emergencies (liquidity) and also get a long term inflation hedge as well. So for example, say you had a 3% mortgage and could get 2% on ...
by larryswedroe
Tue Feb 09, 2016 6:30 pm
Forum: Investing - Theory, News & General
Topic: CAPM & inability to borrow at riskfree rate
Replies: 16
Views: 1144

Re: CAPM & inability to borrow at riskfree rate

rmelvey Agree completely and Kevin Grogan and I wrote paper that appeared in Journal of Investing showing that high equity allocation and longer bonds are more efficient (the equity portion being very high means it dominates the SD of the portfolio so might as well go longer and earn the term premiu...
by larryswedroe
Tue Feb 09, 2016 1:58 pm
Forum: Investing - Theory, News & General
Topic: CAPM & inability to borrow at riskfree rate
Replies: 16
Views: 1144

Re: CAPM & inability to borrow at riskfree rate

Rod
The emergency part is important, an often overlooked (especially a negative when thinking about an otherwise good product of payout annuities, they can reduce flexibility to meet emergency demands)
Larry
by larryswedroe
Tue Feb 09, 2016 1:10 pm
Forum: Investing - Theory, News & General
Topic: CAPM & inability to borrow at riskfree rate
Replies: 16
Views: 1144

Re: CAPM & inability to borrow at riskfree rate

Intrepid First that's a good starting point, but must consider several things including the AT cost of the debt and if fixed rate the inflation hedge it provides. So if say have 3% mortgage and can use the full interest deduction and earn say 2% on muni interest and in highest brackets you are bette...
by larryswedroe
Tue Feb 09, 2016 1:06 pm
Forum: Investing - Theory, News & General
Topic: A look at the small cap premium
Replies: 34
Views: 2980

Re: A look at the small cap premium

Few thoughts First, it's logical that premiums should fall when implementation costs fall as investors care about NET returns. Thus, just as the dramatic fall in the cost of investing in stocks (not only ER ratios, but bid offer spreads and commissions) has IMO contributed to the fall in the ERP (hi...
by larryswedroe
Tue Feb 09, 2016 9:28 am
Forum: Investing - Theory, News & General
Topic: SRI, is there a "price" to pay?
Replies: 1
Views: 283

SRI, is there a "price" to pay?

http://www.advisorperspectives.com/articles/2016/02/08/sustainable-and-responsible-investing-is-there-a-price-to-pay-1 Many investors want to express their values when they make investments. Question is does that come at a price in terms of lower returns. Hope you find this helpful Larry
by larryswedroe
Tue Feb 09, 2016 9:15 am
Forum: Investing - Theory, News & General
Topic: CAPM & inability to borrow at riskfree rate
Replies: 16
Views: 1144

Re: CAPM & inability to borrow at riskfree rate

chatbotte High marginal utility of wealth (which determines the need to take risk) is separate issue, totally, from risk tolerance. You can have a high marginal utility of wealth and low risk tolerance, and vice versa. They are two very different "legs" of the decision "stool". T...
by larryswedroe
Mon Feb 08, 2016 6:37 pm
Forum: Investing - Theory, News & General
Topic: A look at the small cap premium
Replies: 34
Views: 2980

Re: A look at the small cap premium

The S&P 500 is like CRSP 1-2, midcaps are like 3-5 and small 6-10
Larry
by larryswedroe
Mon Feb 08, 2016 8:51 am
Forum: Investing - Theory, News & General
Topic: Dividend Reliability Studies
Replies: 14
Views: 1169

Re: Dividend Reliability Studies

Kalo Unfortunately, IMO that article chose to do what many do which is to limit the data to the post 63 period, ignoring the fact that the very period where value risk is most likely to show up, the Great Depression, gets missed, and the data is there. Include the period and you see that value has b...
by larryswedroe
Mon Feb 08, 2016 8:41 am
Forum: Investing - Theory, News & General
Topic: A look at the small cap premium
Replies: 34
Views: 2980

A look at the small cap premium

http://www.etf.com/sections/index-investor-corner/swedroe-small-caps-still-outperforming
Debunking the claims of an article claiming the small cap premium had disappeared, and then went on to claim, but you can time it to your benefit
Hope you find it helpful.
Larry
by larryswedroe
Sun Feb 07, 2016 7:34 pm
Forum: Investing - Theory, News & General
Topic: Dividend Reliability Studies
Replies: 14
Views: 1169

Re: Dividend Reliability Studies

Kalo Value stocks are the stocks of RISKIER COMPANIES. And in fact their SD of price is also higher both in large and in small, another measure of risk---when you use the longest data series we have. They have lower prices to book market or earnings, etc. That is what he meant by margin of safety. T...
by larryswedroe
Sun Feb 07, 2016 7:22 pm
Forum: Investing - Theory, News & General
Topic: Dividend Reliability Studies
Replies: 14
Views: 1169

Re: Dividend Reliability Studies

what I can say is that the research found that the SD of dividends of value stocks (along with the SD of earnings) is much higher for value than for growth---and that is a simple risk story for the value premium
Larry
by larryswedroe
Sun Feb 07, 2016 9:19 am
Forum: Investing - Theory, News & General
Topic: CAPM & inability to borrow at riskfree rate
Replies: 16
Views: 1144

Re: CAPM & inability to borrow at riskfree rate

Few thoughts, First, the CAPM was the first factor model, and like all models they are flawed, or wrong, otherwise they would be laws, like we have in physics. Now that doesn't mean they don't have value because a model can help advance our understanding of how markets work. Second, among the flaws ...
by larryswedroe
Sat Feb 06, 2016 4:34 pm
Forum: Investing - Theory, News & General
Topic: The failure of valuation predictions
Replies: 124
Views: 7724

Re: The failure of valuation predictions

Rod Again we are in complete agreement, in fact I always explain that outcomes of MCS are NOT the odds, we don't know the exact odds. They are only our best ESTIMATES of the odds and one should treat them as such. In addition one should have plan B's already decided on, the actions you will take if ...
by larryswedroe
Sat Feb 06, 2016 9:02 am
Forum: Investing - Theory, News & General
Topic: AQR's Asness on Fama on Momentum
Replies: 4
Views: 539

Re: AQR's Asness on Fama on Momentum

Just to add this, As noted long only MOM does not have crash problems---because it's the short side that gets hurt in reversals, with the worst performing stocks being high beta stocks when falling but they go way up in reversal. However, if you SCALE momentum you also minimize the effect---reducing...
by larryswedroe
Fri Feb 05, 2016 6:31 pm
Forum: Investing - Theory, News & General
Topic: The failure of valuation predictions
Replies: 124
Views: 7724

Re: The failure of valuation predictions

Rod completely agree and we explicitly warn clients/investors to EXPECT randomly several more of these in their lifetimes making it critical that they don't take more risk than they have the ability, willingness or need to take. And showing them the bottom 5% of MCS results is a good way to do that ...
by larryswedroe
Fri Feb 05, 2016 10:52 am
Forum: Investing - Theory, News & General
Topic: The failure of valuation predictions
Replies: 124
Views: 7724

Re: The failure of valuation predictions

Rod I think most people would say that events like the oil embargo of 73-74, the Asian Contagion of 1998, the events around 911 and the financial crisis were all "black swans"--highly significant events that were basically not forecasted. Now that doesn't mean we could not have a much bigg...
by larryswedroe
Thu Feb 04, 2016 5:59 pm
Forum: Investing - Theory, News & General
Topic: The failure of valuation predictions
Replies: 124
Views: 7724

Re: The failure of valuation predictions

edge actually only at short horizons are markets not LOG normally distributed--they cannot be normally distributed. at longer horizons like even a year they are pretty log normally distributed Also as others have noted,-- MCS can easily account for non normal distributions And finally the three larg...
by larryswedroe
Thu Feb 04, 2016 3:18 pm
Forum: Investing - Theory, News & General
Topic: The failure of valuation predictions
Replies: 124
Views: 7724

Re: The failure of valuation predictions

as fyi, most would consider 2008 a "black swan" type event in terms of what you would worry about and that was in the bottom 5% of outcomes in our MCS runs
Larry
by larryswedroe
Thu Feb 04, 2016 3:14 pm
Forum: Investing - Theory, News & General
Topic: Do value stocks outperform growth when rates rise?
Replies: 4
Views: 408

Re: Do value stocks outperform growth when rates rise?

really depends on WHY rates rising If it's Fed tightening to slow economy/fight inflation that would be BAD for value stocks if it's moderately rising inflation that is good as value stocks more leveraged and inflation reduces cost of debt in real terms if it's due to higher demand, so real rates ri...
by larryswedroe
Wed Feb 03, 2016 5:20 pm
Forum: Investing - Theory, News & General
Topic: a look at floating rate note funds
Replies: 5
Views: 685

Re: a look at floating rate note funds

sorry Sandra, had problem with my little netpad using when traveling, and it pasted the wrong link, I've corrected it
Larry
by larryswedroe
Wed Feb 03, 2016 5:17 pm
Forum: Investing - Theory, News & General
Topic: The failure of valuation predictions
Replies: 124
Views: 7724

Re: The failure of valuation predictions

gmaynardkrebs A MCS is a useful tool to help show the ESTIMATED odds of success based on the estimated potential dispersion of returns. That also allows you to analyze the impact of using various asset allocations and spending rates on the marginal odds of success. Personally I don't know how you ca...
by larryswedroe
Wed Feb 03, 2016 11:37 am
Forum: Investing - Theory, News & General
Topic: a look at floating rate note funds
Replies: 5
Views: 685

a look at floating rate note funds

http://mutualfunds.com/news/2016/02/02/floating-rate-note-funds-too-good-to-be-true/

My take on this "alternative" bond strategy. Hope you find it helpful
Larry
by larryswedroe
Wed Feb 03, 2016 11:27 am
Forum: Investing - Theory, News & General
Topic: QSPIX - thoughts on interesting fund
Replies: 1078
Views: 117901

Re: QSPIX - thoughts on interesting fund

Yes I disagree, VAR is a tool that like all tools is neither good nor bad. Used correctly it is highly useful, misused or abused it is dangerous. Remember the person most easily fooled is yourself and that's what happens when people misuse models. This is really simple concept of leveraging low risk...
by larryswedroe
Wed Feb 03, 2016 11:23 am
Forum: Investing - Theory, News & General
Topic: how limits to arbitrage allow mispricings to persist
Replies: 0
Views: 259

how limits to arbitrage allow mispricings to persist

http://www.etf.com/sections/index-investor-corner/swedroe-arbitrage-limits-cause-mispricing

A new paper on the subject and my summary of its findings and the research overall

Hope you find it helpful
Larry
by larryswedroe
Tue Feb 02, 2016 7:31 pm
Forum: Investing - Theory, News & General
Topic: QSPIX - thoughts on interesting fund
Replies: 1078
Views: 117901

Re: QSPIX - thoughts on interesting fund

Nisiprius There are simple VAR based measures which can be used, like a simple one might be volatility. So you can leverage something like a one one bill which has almost no volatility more than you can leverage large caps which have vol of say 20 and small caps which have vol of say 35. It's like a...
by larryswedroe
Tue Feb 02, 2016 5:38 pm
Forum: Investing - Theory, News & General
Topic: QSPIX - thoughts on interesting fund
Replies: 1078
Views: 117901

Re: QSPIX - thoughts on interesting fund

I learned that they do not believe that this issue will be resolved for perhaps two years, as the people drawing up the rules are lawyers and don't understand the differences of leverage based on risk, so leveraging a one month bill is very different than leveraging a 30 year bond or stocks. The ind...
by larryswedroe
Mon Feb 01, 2016 11:48 am
Forum: Investing - Theory, News & General
Topic: The failure of valuation predictions
Replies: 124
Views: 7724

Re: The failure of valuation predictions

cottonseed We review a client's AA allocation on a regular basis as life events happen and time passes and also valuations and interest rates move causing expected returns to change. Higher than expected returns allows one to lower their equity exposure if they are well into their accumulation phase...
by larryswedroe
Mon Feb 01, 2016 10:19 am
Forum: Investing - Theory, News & General
Topic: The failure of valuation predictions
Replies: 124
Views: 7724

Re: The failure of valuation predictions

Homer This is about as simple an issue as there is in finance. When you buy a bond the expected return is the interest rate MINUS any "expected" default losses. With Treasuries, that's zero. When you buy a stock it works the same way, only instead of interest rate/price you get earnings yi...

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