Search found 99 matches

by skeptic42
Sun Nov 22, 2020 7:14 pm
Forum: Investing - Theory, News & General
Topic: Impact of ESG/SRI investments?
Replies: 6
Views: 265

Re: Impact of ESG/SRI investments?

I like this study: Is Exclusion Effective? , David Blitz & Laurens Swinkels Many believe that investors can contribute to a more sustainable world by divesting from firms with the worst sustainability profiles. However, exclusion comes down to a transfer of ownership from sustainability-minded ...
by skeptic42
Sun Nov 22, 2020 3:53 pm
Forum: Investing - Theory, News & General
Topic: Impact of ESG/SRI investments?
Replies: 6
Views: 265

Impact of ESG/SRI investments?

Can someone point me to a scientific study which shows that there is a statistical significant impact of ESG/SRI investments on the real world, that it really can change something for the better for the E nvironment, S ociety, and G overnance? I tried to google to find such a study, but I don't know...
by skeptic42
Fri Nov 13, 2020 11:29 am
Forum: Investing - Theory, News & General
Topic: The “nuts and bolts” of paying off a mortgage with bonds [Impact to AA & Glidepath]
Replies: 38
Views: 2460

Re: The “nuts and bolts” of paying off a mortgage with bonds [Impact to AA & Glidepath]

This is one of the problems that occur when bucketing. Suppose that you have a liquid net worth of $300k, split $200k equities and $100k bonds, and a house of $200k. Is this an 66/33 asset allocation? No, it's an 40% stocks, 20% bonds, and 40% real estate asset allocation. To get a 100% stock asset...
by skeptic42
Fri Nov 13, 2020 6:56 am
Forum: Investing - Theory, News & General
Topic: The “nuts and bolts” of paying off a mortgage with bonds [Impact to AA & Glidepath]
Replies: 38
Views: 2460

Re: The “nuts and bolts” of paying off a mortgage with bonds [Impact to AA & Glidepath]

This is one of the problems that occur when bucketing. Suppose that you have a liquid net worth of $300k, split $200k equities and $100k bonds, and a house of $200k. Is this an 66/33 asset allocation? No, it's an 40% stocks, 20% bonds, and 40% real estate asset allocation. To get a 100% stock asset...
by skeptic42
Sat Nov 07, 2020 9:01 am
Forum: Investing - Theory, News & General
Topic: Reading Fama French 3 factor regression
Replies: 28
Views: 1747

Re: Reading Fama French 3 factor regression

A problem is that if one tests a lot of hypothesis with the same data set, one will find something statistical significant (p < 0.05) just by random chance, like p-hacking. A solution to this problem is to use a correction and demand a smaller p-value for statistical significance, e.g. https://en.wi...
by skeptic42
Sun Oct 18, 2020 4:56 pm
Forum: Investing - Theory, News & General
Topic: Time-Series Momentum: Is It There?
Replies: 42
Views: 3027

Re: Time-Series Momentum: Is It There?

Statistically significant means that we are 95% confident that the return (of HmL) in some time period was greater than zero. Within expectations means that the realized return is within a 95% confidence interval of the expected return. I compared DFISX (int. small cal) with DISVX (int. small cap v...
by skeptic42
Sat Oct 17, 2020 3:44 pm
Forum: Investing - Theory, News & General
Topic: Time-Series Momentum: Is It There?
Replies: 42
Views: 3027

Re: Time-Series Momentum: Is It There?

You cannot invest directly in HmL. HmL is a theoretical investment that is defined as the difference between all value stocks and all growth stocks. You can invest in funds that attempt to obtain exposure to this theoretical investment. The longest running international small cap fund I can find is...
by skeptic42
Fri Oct 16, 2020 5:13 pm
Forum: Investing - Theory, News & General
Topic: Time-Series Momentum: Is It There?
Replies: 42
Views: 3027

Re: Time-Series Momentum: Is It There?

The difference is that factors (at least HmL, and possibly SmB5, MOM, BAB, QmJ as well) actually do predict future returns in a way that is statistically significant and works out-of-sample. HmL has not worked "out of sample" to predict or deliver higher returns. Real world returns have u...
by skeptic42
Fri Oct 16, 2020 10:33 am
Forum: Investing - Theory, News & General
Topic: Time-Series Momentum: Is It There?
Replies: 42
Views: 3027

Re: Time-Series Momentum: Is It There?

"Does not predict future returns" The people selling all of these "factor" funds and other back-tested data-mined strategies are even required to tell investors that's the case, but that doesn't stop people from chasing them. The difference is that factors (at least HmL, and pos...
by skeptic42
Fri Oct 16, 2020 10:15 am
Forum: Personal Consumer Issues
Topic: Favorite Science Fiction Movies
Replies: 179
Views: 8675

Re: Favorite Science Fiction Movies

Equilibrium
Evolution
by skeptic42
Thu Apr 30, 2020 11:37 am
Forum: Investing - Theory, News & General
Topic: The Bottom Line on Factor Investing
Replies: 290
Views: 12977

Re: The Bottom Line on Factor Investing

I think there is a lot of agreement that there are more risk factors than just a single market factor. The disagreement is with the notion that these factors deserve a persistent premium which is more than a data-mining artifact from backtests. It would be illogical for anyone to believe that there...
by skeptic42
Thu Apr 30, 2020 11:04 am
Forum: Investing - Theory, News & General
Topic: The Bottom Line on Factor Investing
Replies: 290
Views: 12977

Re: The Bottom Line on Factor Investing

Not quite the same in my mind. Overweighting small is a diversification from TSM only if it has some return generation mechanism different and independent from the rest of the market. This might be true or it might just be data mining. Or it might have been true 30+ years ago but market changes (eg...
by skeptic42
Thu Apr 30, 2020 9:53 am
Forum: Investing - Theory, News & General
Topic: The Bottom Line on Factor Investing
Replies: 290
Views: 12977

Re: The Bottom Line on Factor Investing

The aha moment was realizing that small caps, just like international is a way of diversifying my portfolio. Not quite the same in my mind. Overweighting small is a diversification from TSM only if it has some return generation mechanism different and independent from the rest of the market. This m...
by skeptic42
Thu Apr 30, 2020 9:15 am
Forum: Investing - Theory, News & General
Topic: First 20% of bonds in long-term Treasuries
Replies: 927
Views: 68740

Re: First 20% of bonds in long-term Treasuries

... ... Of course there are multiple sources of risk. We've been discussing them all throughout this thread, so it's baffling to see that you think they haven't been considered. That is not how I experienced this discussion. The whole concept of liability matching is only relevant in the extremely ...
by skeptic42
Mon Apr 27, 2020 4:53 am
Forum: Investing - Theory, News & General
Topic: Statistics on timers in market crashes?
Replies: 103
Views: 5443

Re: Statistics on timers in market crashes?

No. The 200 DMA for VTI (Vanguard's TSM ETF) is at 151.22, which is above the current price of 141.63. So when the price moves below the 200 DMA you sell, and when it moves above the 200 DMA you buy? Yes, though that's not my strategy. Willthrill, The problem that I have with the 200 DMA is its suc...
by skeptic42
Mon Apr 20, 2020 10:39 am
Forum: Investing - Theory, News & General
Topic: Renaissance Says Quant Models Misfired During March Mayhem
Replies: 56
Views: 4993

Re: Renaissance Says Quant Models Misfired During March Mayhem

RenTech is quite transparent unlike most hedge funds. The company hires nobel/fields medal people + top phds only to have fun with their own side money (yes, the fund was made for themselves, not for others). It has quite an interesting history in that it was doing high freq trading before anyone e...
by skeptic42
Sat Apr 18, 2020 8:31 am
Forum: Investing - Theory, News & General
Topic: Risk Reward of Long Term v Intermediate Treasuries at current rates?
Replies: 155
Views: 8599

Re: Risk Reward of Long Term v Intermediate Treasuries at current rates?

The investor really only has to answer to pretty basic questions. 1) When will I spend the money? 2) How sensitive is the expense to the rate of inflation? The answers to those questions gets them 95% of the way to their bond strategy. A long-term investor should invest in long-term bonds, right? O...
by skeptic42
Mon Apr 06, 2020 6:55 pm
Forum: Investing - Theory, News & General
Topic: HEDGEFUNDIE's excellent adventure Part II: The next journey
Replies: 6710
Views: 643157

Re: HEDGEFUNDIE's excellent adventure Part II: The next journey

Just want to point out that today S&P is down 21% from its high while UPRO is down 63%, exactly 3x. Where is the volatility decay??? The volatility decay is right there. If the 21% loss comes from a steady and monotonic decrease spread over many days, a 3x daily leveraged strategy should be dow...
by skeptic42
Thu Mar 26, 2020 12:14 pm
Forum: Non-US Investing
Topic: ETF price no longer updated
Replies: 5
Views: 517

Re: ETF price no longer updated

It was merged with ISIN IE00B4X9L533. My broker exchanged the ETF shares without any tax consequences.
by skeptic42
Sat Feb 29, 2020 5:06 am
Forum: Investing - Theory, News & General
Topic: My trend following strategy and experience
Replies: 1524
Views: 125094

Re: My trend following strategy and experience

We're just rehashing old arguments again. Trend following has had as good or better max drawdown as B&H the same assets, but has the potential to outperform & underperform the same. Comparing a trend following strategy to a 60/40 portfolio is a very bad comparison. There, I've basically sum...
by skeptic42
Wed Dec 04, 2019 5:07 pm
Forum: Investing - Theory, News & General
Topic: [Wiki article update - Inverse and leveraged ETFs]
Replies: 121
Views: 5329

Re: [Wiki article update - Inverse and leveraged ETFs]

I think volatility drag and volatility decay are related phenomena, but not necessarily the same. Volatility drag expresses the difference between arithmetic and geometric means due to volatility. Volatility decay happens due to continuously rebalancing a volatile leveraged asset allocation. (e.g. ...
by skeptic42
Wed Dec 04, 2019 9:42 am
Forum: Investing - Theory, News & General
Topic: [Wiki article update - Inverse and leveraged ETFs]
Replies: 121
Views: 5329

Re: [Wiki article update - Inverse and leveraged ETFs]

I think volatility drag and volatility decay are related phenomena, but not necessarily the same. Volatility drag expresses the difference between arithmetic and geometric means due to volatility. Volatility decay happens due to continuously rebalancing a volatile leveraged asset allocation. (e.g. a...
by skeptic42
Wed Nov 20, 2019 2:30 pm
Forum: Non-US Investing
Topic: Global Government Bonds ETFs hedged to EUR - available in Germany
Replies: 3
Views: 492

Re: Global Government Bonds ETFs hedged to EUR - available in Germany

All your 3 found funds track the same index, "FTSE World Government Bond Index - Developed Markets". I think they are different share classes of one and the same bond fund. And number 1 is not hedged to EUR.
by skeptic42
Sat Nov 02, 2019 3:50 pm
Forum: Non-US Investing
Topic: What bond funds do you hold or would you ideally hold as a non-US investor, is global aggregate enough?
Replies: 21
Views: 2895

Re: What bond funds do you hold or would you ideally hold as a non-US investor, is global aggregate enough?

StarsChild wrote: Sat Nov 02, 2019 2:23 pm I would like to go for iglo or IAAA but from my research the only etf which is accumulating and eur edged is aggg, right? Any other option in this area?
There is an accumulating Global Govt Bond ETF hedged to EUR from Xtrackers (DBZB).
by skeptic42
Tue Sep 03, 2019 2:16 am
Forum: Non-US Investing
Topic: The cost of hedging for aggregate bond investors
Replies: 13
Views: 1155

Re: The cost of hedging for aggregate bond investors

From what I have read, hedging from US to EUR takes about 3% from your yield. So for instance, if YTM for Vanguard Global Aggregate Bond UCITS ETF EUR Hedged Accumulating (VAGF) is 1.3%, this means our nominal return is -1.7%, while if we also adjust with inflation, it gets about -2.8% real return....
by skeptic42
Sun Sep 01, 2019 5:27 pm
Forum: Investing - Theory, News & General
Topic: Rob Arnott on value investing and the Achilles' heel of market cap indexing (Morningstar podcast)
Replies: 63
Views: 6847

Re: Rob Arnott on value investing and the Achilles' heel of market cap indexing (Morningstar podcast)

There's no beating around the bush: total market funds are large cap funds for all intents and purposes. From 1993 until now, the annualized returns of VTSMX (TSM) and VFINX (S&P 500) were separated by just one basis point, and all other metrics were nearly identical. That doesn't make TSM or m...
by skeptic42
Sat Aug 31, 2019 3:37 am
Forum: Investing - Theory, News & General
Topic: Uncle Fred’s Second Coin – The Case for Leveraged Bonds
Replies: 133
Views: 9428

Re: Uncle Fred’s Second Coin – The Case for Leveraged Bonds

However, as robermcd stated, I still am of the opinion that leveraging the STT (which generally have a higher sharpe ratio) is preferred over using LTT. I think using leveraged STT is possibly a very reasonable strategy, though it sounds to me very much like an attempt at arbitrage. And I generally...
by skeptic42
Tue Aug 27, 2019 7:26 am
Forum: Investing - Theory, News & General
Topic: "Factors" and language misuse
Replies: 71
Views: 4129

Re: "Factors" and language misuse

Thanks for this great summary, stlutz! But investing in the total market (however that is defined) has a much richer set of exposures than the dismissal, “You’re just investing in beta”. IMO this is one of the most annoying statements in all of these factor threads. As you noted the factors are arbi...
by skeptic42
Tue Aug 27, 2019 6:14 am
Forum: Investing - Theory, News & General
Topic: At what point would Bonds be considered a bubble or 'speculative asset'?
Replies: 51
Views: 5219

Re: At what point would Bonds be considered a bubble or 'speculative asset'?

In my view, an interest rate of zero or less is not a natural state of things. A person should naturally demand a “liquidity premium” of some amount to incent him to tie up his money in a bond rather than cash. Having a zero or negative liquidity premium makes no sense to me. So a common sense defi...
by skeptic42
Sat Aug 24, 2019 4:19 am
Forum: Investing - Theory, News & General
Topic: [Larry Swedroe: Small Value Stocks are Cheap, Factor Investing Works]
Replies: 673
Views: 30642

Re: Larry Swedroe: Factor Investing Works (Despite What Some May Say)

... Again, I totally agree that it's possible that the theory is sound, and it just hasn't worked out in the short time we've been using it... But any reasonable person should be able to wonder, if maybe, just maybe, the theory is wrong. That is not a stupid position to take. +1 One could call it t...
by skeptic42
Tue Aug 20, 2019 5:42 am
Forum: Investing - Theory, News & General
Topic: Total market index fund and recency
Replies: 29
Views: 2259

Re: Total market index fund and recency

He (John Bogle)argued any benefits from small, value, and other departures from the total market, were temporary anomalies that would come out in the wash due to mean reversion. My understanding is that the important thing is not that small and value will do better, but that they are less correlate...
by skeptic42
Sun Aug 11, 2019 2:47 pm
Forum: Investing - Theory, News & General
Topic: Factors, tilting, and efficient markets
Replies: 55
Views: 3959

Re: Factors, tilting, and efficient markets

The momentum behavioral stories are lacking some logic as well:
1. Investors tend to sell their winners too early and hold their losers too long.
2. Investors tend to follow the herd, buying recent winners and selling recent losers.
by skeptic42
Sat Aug 03, 2019 3:48 am
Forum: Investing - Theory, News & General
Topic: Asset Allocation w/ Bond Yields at Zero%
Replies: 12
Views: 2154

Re: Asset Allocation w/ Bond Yields at Zero%

I am from Europe and I hold a bond ETF including negative yields, because I don't want to hold 100% stocks. Funny thing, the return of the bond ETF was not so bad despite negative yields. Nevertheless, if you look at the stocks/bonds portfolio as a whole, the negative yield of some bonds is not that...
by skeptic42
Tue Jul 30, 2019 9:15 am
Forum: Investing - Theory, News & General
Topic: John Bogle's "Philosophical Disagreement" with Eugene Fama
Replies: 104
Views: 12062

Re: John Bogle's "Philosophical Disagreement" with Eugene Fama

I mean, if small and value stocks are RISKIER then they should continue to outperform... otherwise, why would we expect stocks to beat bonds? But, are small and value stocks riskier? Small stocks seem to be riskier, but sometimes people prefer riskier things just for fun, like gambling. I am not co...
by skeptic42
Sat Jun 22, 2019 4:41 am
Forum: Investing - Theory, News & General
Topic: Net worth and risk tolerance
Replies: 30
Views: 5125

Re: Net worth and risk tolerance

My head is spinning :shock: I heard two interpretation on this issue. 1) The higher the net worth, the higher the risk tolerance. Example: a 20% drop in a $5m portfolio is more tolerable than a 20% drop in $200k portfolio. 2) The lower the net worth, the higher the risk tolerance. Example: a 20% dr...
by skeptic42
Wed Jun 19, 2019 11:57 am
Forum: Investing - Theory, News & General
Topic: Utilities - worth another look?
Replies: 192
Views: 20975

Re: Utilities - worth another look?

What if instead of VPU (utilities etf) we used one utility stock. NextEra (NEE) is the largest holding in VPU. Consider this portfolio: 50% VTI / 50% NEE According to portfolio visualizer, NEE and VTI have a correlation of 0.4. Therefore, the above portfolio should be objectively more diversified t...
by skeptic42
Tue Jun 18, 2019 6:42 pm
Forum: Investing - Theory, News & General
Topic: Utilities - worth another look?
Replies: 192
Views: 20975

Re: Utilities - worth another look?

Do you know what weights would be assigned to each sector, if you maximize the diversification ratio of a portfolio built of all sectors which are part of TSM? I was out of town for funeral this weekend, but I just ran the numbers and got this: 38.88% Vanguard Utilities ETF ( VPU ) 18.04% Vanguard ...
by skeptic42
Mon Jun 17, 2019 9:46 am
Forum: Investing - Theory, News & General
Topic: Utilities - worth another look?
Replies: 192
Views: 20975

Re: Utilities - worth another look?

Mathematically speaking, the logical issue is due to the diversification ratio is not associative. That means the DR of assets A,B,C is not the same as the DR of (A,B),C. For example, three assets with the exact same volatilities and expected returns and zero correlations, it is logical from symmetr...
by skeptic42
Sun Jun 16, 2019 5:27 pm
Forum: Investing - Theory, News & General
Topic: Larry Swedroe: Has The Value Trade Become Overcrowded.
Replies: 64
Views: 5394

Re: Larry Swedroe: Has The Value Trade Become Overcrowded.

As I've said in other threads, whenever we have the next significant and sustained downturn in the market, I predict that value will outperform nicely just because it hasn't gone up as much --value stocks seem to be playing their more traditional role of being the less risky part of the market. The...
by skeptic42
Sun Jun 16, 2019 3:26 pm
Forum: Investing - Theory, News & General
Topic: Utilities - worth another look?
Replies: 192
Views: 20975

Re: Utilities - worth another look?

That's a good observation. A similar logical issue occurs with risk parity. IMO this logical issue makes the diversification ratio less useful as an objective measurement of diversification, because the DR of TSM alone is 1, adding VPU increases the DR, but VPU is already part of TSM, so you are ad...
by skeptic42
Sun Jun 16, 2019 3:32 am
Forum: Investing - Theory, News & General
Topic: Utilities - worth another look?
Replies: 192
Views: 20975

Re: Utilities - worth another look?

Portfolio A: 100% TSM Portfolio B: 50% TSM / 50% VPU (utilities) Is Portfolio B objectively more diversified? If so, how do you know? Is there a metric you look at to determine this? This is a serious question. I’ve been thinking a lot about diversification and I’m not sure how to measure it in a l...
by skeptic42
Sat Jun 15, 2019 5:43 pm
Forum: Investing - Theory, News & General
Topic: [Deleted]
Replies: 128
Views: 8783

Re: What is wrong with AQR?

One cannot believe in efficient markets and also think that much more volatile small value stocks don't have higher expected returns than TSM--that's like saying you don't believe much higher SD stocks don't have higher expected returns than tbills. The factor research discovered a low volatility a...
by skeptic42
Fri Jun 14, 2019 6:23 pm
Forum: Investing - Theory, News & General
Topic: Factors: After being spotted in the wild, where have they gone?
Replies: 22
Views: 2796

Re: Factors: After being spotted in the wild, where have they gone?

Much the same pattern can be seen in commodities (or, at any rate, collateralized commodities funds). And in managed futures funds. Here's a chart for managed futures. There is a Credit Suisse Managed Futures Liquid index (grey), and up through 2008 it was going gangbusters, about 11% per year. Exc...
by skeptic42
Fri Jun 14, 2019 10:08 am
Forum: Investing - Theory, News & General
Topic: Excellent Larry Swedroe Podcast Interview: Factors For The Long Run
Replies: 337
Views: 21751

Re: Excellent Larry Swedroe Podcast Interview: Factors For The Long Run

Packer, here's an entirely different view of your statement When you deviate from a market weighted portfolio, you are saying you know better than the market on average on how to weight stocks in a portfolio When you deviate from market it's because you want to avoid the concentration of risk in th...
by skeptic42
Thu Jun 13, 2019 3:47 pm
Forum: Investing - Theory, News & General
Topic: Excellent Larry Swedroe Podcast Interview: Factors For The Long Run
Replies: 337
Views: 21751

Re: Excellent Larry Swedroe Podcast Interview: Factors For The Long Run

I have not seen a successful multi-factor fund that has truly done better than the TSM funds. Small sample but INTF did better than TSM funds since inception. ISCF did even better . The first group appears pretty close (no where near the 2% difference folks have been talking about). For the second ...
by skeptic42
Thu Jun 13, 2019 10:25 am
Forum: Investing - Theory, News & General
Topic: [Deleted]
Replies: 128
Views: 8783

Re: What is wrong with AQR?

Shouldn't a long position in a futures contract return almost the same as an investment in the underlying asset?
Then why was the performance of managed futures so bad?
How could they miss all the returns of stocks and bonds in the last years?
by skeptic42
Thu Jun 13, 2019 9:53 am
Forum: Investing - Theory, News & General
Topic: Excellent Larry Swedroe Podcast Interview: Factors For The Long Run
Replies: 337
Views: 21751

Re: Excellent Larry Swedroe Podcast Interview: Factors For The Long Run

The factors argument in my view boils down to this. If they are based solely on risk, the quants and the computers could arbitrage them away. If they are based on human nature, the quants and computers could hold them down for a while before human nature and human behavior, the cycle of greed and f...
by skeptic42
Thu Jun 13, 2019 5:55 am
Forum: Investing - Theory, News & General
Topic: Excellent Larry Swedroe Podcast Interview: Factors For The Long Run
Replies: 337
Views: 21751

Re: Excellent Larry Swedroe Podcast Interview: Factors For The Long Run

The factors argument in my view boils down to this. If they are based solely on risk, the quants and the computers could arbitrage them away. If they are based on human nature, the quants and computers could hold them down for a while before human nature and human behavior, the cycle of greed and f...