Search found 105 matches

by Uncorrelated
Fri Nov 15, 2019 6:47 am
Forum: Investing - Theory, News & General
Topic: 3 funds and 3% withdraw rate
Replies: 22
Views: 1106

Re: 3 funds and 3% withdraw rate

Even if you have 3% yield, inflation still erodes your capital over time. Even if you have 3% yield + inflation, there is no guarantee that your principal stays stable over time. You should ignore the yield from your portfolio and focus only on total return. The total return can be higher or lower t...
by Uncorrelated
Thu Nov 14, 2019 4:38 am
Forum: Investing - Theory, News & General
Topic: MOM is real, too bad it doesn't work
Replies: 27
Views: 5094

Re: MOM is real, too bad it doesn't work

andromeda2k12 wrote:
Wed Nov 13, 2019 7:13 pm
Uncorrelated wrote:
Wed Nov 13, 2019 4:28 am
Interesting, 0.22% doesn't seem absurdly high though considering the theoretical premium right?
That's true, I expected the costs to be higher. I don't know how accurate these figures are, there is a fair bit of guesswork involved in estimating the transaction costs for illiquid securities.
by Uncorrelated
Wed Nov 13, 2019 9:05 am
Forum: Investing - Theory, News & General
Topic: Small Cap Value heads Rejoice !!!
Replies: 341
Views: 39760

Re: International Small Cap Value

I would stay away from momentum funds. Literature claims that although the momentum premium is persistent in theory, there are big issues with it in practice. See this thread from today: https://www.bogleheads.org/forum/viewtopic.php?f=10&t=294890 Tracking error can't be the reason for the disparit...
by Uncorrelated
Wed Nov 13, 2019 6:46 am
Forum: Investing - Theory, News & General
Topic: MOM is real, too bad it doesn't work
Replies: 27
Views: 5094

Re: MOM is real, too bad it doesn't work

ARoseByAnyOtherName wrote:
Wed Nov 13, 2019 6:17 am
The spread is the biggest factor. Getting your orders to reliably execute at a spread of zero is not trivial. In fact, that is where high frequency traders and market makers make all their money.
by Uncorrelated
Wed Nov 13, 2019 4:28 am
Forum: Investing - Theory, News & General
Topic: MOM is real, too bad it doesn't work
Replies: 27
Views: 5094

Re: MOM is real, too bad it doesn't work

The article says the reason this doesn’t work in practice is trading/transaction costs. What’s the exact definition of trading costs here? Is it trade commissions, bid-ask spreads, or something else, or all of the above? What I’m getting at: does this imply that an individual investor, trading indi...
by Uncorrelated
Wed Nov 13, 2019 4:13 am
Forum: Investing - Theory, News & General
Topic: MOM is real, too bad it doesn't work
Replies: 27
Views: 5094

Re: MOM is real, too bad it doesn't work

Methodology may be why iShares MTUM beats PDP & QMOM, naive academic approach (high turnover, less liquid stocks, stale momentum) vs pragmatic approach (liquid megacap bluechips with some amount of momentum). Since fund inception the alpha was statistically insignificant for all funds with all fact...
by Uncorrelated
Tue Nov 12, 2019 8:45 pm
Forum: Investing - Theory, News & General
Topic: MOM is real, too bad it doesn't work
Replies: 27
Views: 5094

Re: MOM is real, too bad it doesn't work

Methodology may be why iShares MTUM beats PDP & QMOM, naive academic approach (high turnover, less liquid stocks, stale momentum) vs pragmatic approach (liquid megacap bluechips with some amount of momentum). According to portfoliovisualizer and both FF, AA and AQR factor sets, MTUM has negative si...
by Uncorrelated
Tue Nov 12, 2019 3:21 pm
Forum: Investing - Theory, News & General
Topic: Small Cap Value heads Rejoice !!!
Replies: 341
Views: 39760

Re: International Small Cap Value

I didn't realize that ISCF targets value and size. My bad. Too bad we can't get it in the Netherlands. Afaik the only iShares multifactor fund marketed to Europeans is this one: IE00BZ0PKT83 (there's also a EU and US version). If possible, could you run a factor regression on it? R^2: 0.86 adj R^2:...
by Uncorrelated
Tue Nov 12, 2019 1:52 pm
Forum: Investing - Theory, News & General
Topic: Small Cap Value heads Rejoice !!!
Replies: 341
Views: 39760

Re: International Small Cap Value

For those true believers, what International SCV funds do you hold? Im not a true believer, I use ISCF. I believe international small cap value has benefited the most in the recent value rebound. Cheers :greedy ISCF has large negative value exposure according with both FF and ARQ factors (not stati...
by Uncorrelated
Tue Nov 12, 2019 9:23 am
Forum: Investing - Theory, News & General
Topic: Small Cap Value heads Rejoice !!!
Replies: 341
Views: 39760

Re: International Small Cap Value

For those true believers, what International SCV funds do you hold? Im not a true believer, I use ISCF. I believe international small cap value has benefited the most in the recent value rebound. Cheers :greedy ISCF has large negative value exposure according with both FF and ARQ factors (not stati...
by Uncorrelated
Sun Nov 10, 2019 7:22 am
Forum: Investing - Theory, News & General
Topic: Lifecycle Investing - Leveraging when young
Replies: 631
Views: 46188

Re: Lifecycle Investing - Leveraging when young

This was discussed in the HF thread.... different levels of STT leverage depending upon if rates are low/ high to get duration equivalent to LTT https://www.bogleheads.org/forum/viewtopic.php?f=10&t=288192&p=4764748&hilit=Kevin#p4764748 I don't think that is the answer. I did some research and it a...
by Uncorrelated
Sat Nov 09, 2019 6:56 pm
Forum: Investing - Theory, News & General
Topic: Lifecycle Investing - Leveraging when young
Replies: 631
Views: 46188

Re: Lifecycle Investing - Leveraging when young

EfficientInvestor will have to wait a bit longer on a response so I have time to review some literature. 305pelusa might also be interested in reading this. I get where you are coming from when you are targeting a lifetime constant equity exposure, but that doesn't look very optimal to me. The paper...
by Uncorrelated
Fri Nov 08, 2019 1:28 pm
Forum: Investing - Theory, News & General
Topic: Lifecycle Investing - Leveraging when young
Replies: 631
Views: 46188

Re: Lifecycle Investing - Leveraging when young

Just wanted to add a few thoughts to this discussion. Edit/addition: I’ll also point out that I decrease my amount of leverage as interest rates rise. So if I’m currently 10x right now, my borrow rate is 1.5%, and an unleveraged max drawdown of STT is 4%, then that would be a leveraged max drawdown...
by Uncorrelated
Fri Nov 08, 2019 10:13 am
Forum: Investing - Theory, News & General
Topic: Lifecycle Investing - Leveraging when young
Replies: 631
Views: 46188

Re: Lifecycle Investing - Leveraging when young

Just wanted to add a few thoughts to this discussion. Note that my backtests below for Portfolio 2 just uses the oldest bond mutual fund I could find a ticker symbol for. I implement my actual strategy with treasury futures. Unfortunately that is not nearly enough data. See this chart from ERN in pa...
by Uncorrelated
Fri Nov 08, 2019 9:45 am
Forum: Investing - Theory, News & General
Topic: Small Cap Value heads Rejoice !!!
Replies: 341
Views: 39760

Re: Small Cap Value heads Rejoice !!!

Why would you ignore the alpha? It just implies it has loadings of RmW and CmA that I would probably catch if I did all factors. Remember I'm regressing IJS's index, not IJS itself. So I don't expect the numbers to necessarily be similar. In my post, on the first paragraph of my conclusion, I expla...
by Uncorrelated
Fri Nov 08, 2019 6:41 am
Forum: Investing - Theory, News & General
Topic: Lifecycle Investing - Leveraging when young
Replies: 631
Views: 46188

Re: Lifecycle Investing - Leveraging when young

I think he may well be fine because nearly all his leverage is in an un-callable family loan. But to do this with margin would probably be violating the Kelly Criterion. The kelly criterion is only relevant if you have a logarithmic utility function (constant risk aversion coefficient of 1). This i...
by Uncorrelated
Fri Nov 08, 2019 6:05 am
Forum: Investing - Theory, News & General
Topic: Small Cap Value heads Rejoice !!!
Replies: 341
Views: 39760

Re: Small Cap Value heads Rejoice !!!

Had an R^2 of 0.974. All factors were statistically significant. The alpha seems to imply exposure to other factors (RmW and CmA) so I'll take it into account below. That sounds fishy. I would ignore the alpha for this fund, the fund doesn't do any special market timing that can explain the alpha. ...
by Uncorrelated
Wed Nov 06, 2019 6:24 am
Forum: Investing - Theory, News & General
Topic: An Alternate to HEDGEFUNDIE's Adventure
Replies: 19
Views: 1581

Re: An Alternate to HEDGEFUNDIE's Adventure

I do not understand and will continue to not understand why people think rising interest rates is bad for the strategy. You should want rising rates. You should be begging for rates to skyrocket; the faster, the better. This will let you reinvest at the much more attractive yields. It will look ter...
by Uncorrelated
Tue Nov 05, 2019 3:53 pm
Forum: Investing - Theory, News & General
Topic: Small Cap Value heads Rejoice !!!
Replies: 341
Views: 39760

Re: Small Cap Value heads Rejoice !!!

Ah sorry, I did not notice that was the case with ZPRV. I just saw it has an MSCI index, which is easy to get data for. When I get a chance, I'll regress it and compare values. Some things that matter to me are R^2 values and alphas, which I didn't see for ZPRV in your comment. Also, I'm not necess...
by Uncorrelated
Tue Nov 05, 2019 3:16 pm
Forum: Investing - Theory, News & General
Topic: Low Beta vs High Beta & Lump Sum vs DCA
Replies: 2
Views: 190

Re: Low Beta vs High Beta & Lump Sum vs DCA

For dollar cost averaging vs lump sum, the following mathematical paper can be helpful: An Introduction to Computational Finance Without Agonizing Pain . Theory 1 on page 119 proves a proof that lump sum investing is better than a glidepath, and 12.4.2. states that this result means that lump sum in...
by Uncorrelated
Tue Nov 05, 2019 1:24 pm
Forum: Investing - Theory, News & General
Topic: Jim Simons and Renaissance Technologies
Replies: 9
Views: 1012

Re: Jim Simons and Renaissance Technologies

I don't consider Renaissance Technologies a hedge fund. Their portfolio turnover is probably in the millions, I call that HFT.
by Uncorrelated
Sun Nov 03, 2019 1:26 pm
Forum: Investing - Theory, News & General
Topic: How do you reconcile these two opposing views
Replies: 42
Views: 3678

Re: How do you reconcile these two opposing views

For those who sell and stay in cash until the market 'feels' better, the case is clear. The less you're exposed to the market, the less gains (on average, in the long run) you will get. Cash isn't king, it's drag! For those who change their AA to something more conservative (e.g. stocks to bonds) u...
by Uncorrelated
Sun Nov 03, 2019 6:08 am
Forum: Investing - Theory, News & General
Topic: How do you reconcile these two opposing views
Replies: 42
Views: 3678

Re: How do you reconcile these two opposing views

"It seems to me like there's two classes of investing philosophies: Those who truly believe markets are efficient and no predictions of future events can be done," "and those who believe in some level of "mean-reversion"/"history will repeat"/"markets can get somewhat irrational". These two stateme...
by Uncorrelated
Fri Nov 01, 2019 7:19 pm
Forum: Investing - Theory, News & General
Topic: Optimal asset allocation strategies for retirement & saving
Replies: 28
Views: 4196

Re: Optimal asset allocation strategies for retirement & saving

However, as someone who is still in the accumulation phase, I would like to know what the accumulation counterpart to this graph looks like. In some ways, it ought to be symmetrical. If the guy with 30x expenses ought to be in 60/40 the day after retirement, he ought to be in 60/40 the day before r...
by Uncorrelated
Fri Nov 01, 2019 2:18 pm
Forum: Investing - Theory, News & General
Topic: How to diversify a Three Fund Portfolio in 8 steps
Replies: 66
Views: 4873

Re: How to diversify a Three Fund Portfolio in 8 steps

As a believer in factors, it is clear to me that portfolio 8 has more risk (measured in expected stddev) than portfolio 1, but it is not clear whether that extra risk is adequately compensated with higher expected return. How did you calculate the "expected stddev" ? By taking the factor loadings o...
by Uncorrelated
Fri Nov 01, 2019 12:36 pm
Forum: Investing - Theory, News & General
Topic: How to diversify a Three Fund Portfolio in 8 steps
Replies: 66
Views: 4873

Re: How to diversify a Three Fund Portfolio in 8 steps

As a believer in factors, it is clear to me that portfolio 8 has more risk (measured in expected stddev) than portfolio 1, but it is not clear whether that extra risk is adequately compensated with higher expected return. How did you calculate the "expected stddev" ? By taking the factor loadings o...
by Uncorrelated
Fri Nov 01, 2019 11:16 am
Forum: Investing - Theory, News & General
Topic: How to diversify a Three Fund Portfolio in 8 steps
Replies: 66
Views: 4873

Re: How to diversify a Three Fund Portfolio in 8 steps

Where can i subscribe to your newsletter? You constructed a portfolio of a broadbased index and single stock with in the same index and declared this is sufficient to declare DR is useless. Who is backtesting? All DR is doing is quantifying some reduction in volatility because of correlation. Here ...
by Uncorrelated
Fri Nov 01, 2019 9:33 am
Forum: Investing - Theory, News & General
Topic: Optimal asset allocation strategies for retirement & saving
Replies: 28
Views: 4196

Re: Optimal asset allocation strategies for retirement & saving

I generated solutions for this scenario with different savings rates: ... The overall conclusion (100% stocks until you are 85% along to way to your goal) appears robust across different savings rates. Thank you so much for running these numbers, they are illuminating. Would the following approach ...
by Uncorrelated
Fri Nov 01, 2019 8:42 am
Forum: Investing - Theory, News & General
Topic: How to diversify a Three Fund Portfolio in 8 steps
Replies: 66
Views: 4873

Re: How to diversify a Three Fund Portfolio in 8 steps

Hydromod wrote:
Fri Nov 01, 2019 7:08 am
Just out of curiosity, what part of the exercise contained backtesting? I missed it somehow.
The diversification ratio calculation requires the overall portfolio volatility and correlations, in this example these are determined by backtesting the individual assets and portfolio.
by Uncorrelated
Fri Nov 01, 2019 5:56 am
Forum: Investing - Theory, News & General
Topic: How to diversify a Three Fund Portfolio in 8 steps
Replies: 66
Views: 4873

Re: How to diversify a Three Fund Portfolio in 8 steps

I did some quick calculations and came to the conclusion that diversification ratio is thoroughly broken. For example take the following portfolio: VTI (50%) + walmart (50%) Walmart has a correlation of .26 with VTI. This portfolio has a higher sharpe ratio than just VTI and a diversification ratio ...
by Uncorrelated
Wed Oct 30, 2019 2:22 pm
Forum: Investing - Theory, News & General
Topic: How to diversify a Three Fund Portfolio in 8 steps
Replies: 66
Views: 4873

Re: How to diversify a Three Fund Portfolio in 8 steps

In other words, given two portfolios with identical factor loadings, I have a preference for the one that has mostly SCV (like SLYV). Say 80% SLYV/20% MTUM vs 50% SLYV/50% MF. They might have similar loadings, but I would prefer the former. That is not true. Two funds with the same value exposure h...
by Uncorrelated
Wed Oct 30, 2019 12:54 pm
Forum: Investing - Theory, News & General
Topic: How to diversify a Three Fund Portfolio in 8 steps
Replies: 66
Views: 4873

Re: How to diversify a Three Fund Portfolio in 8 steps

In other words, given two portfolios with identical factor loadings, I have a preference for the one that has mostly SCV (like SLYV). Say 80% SLYV/20% MTUM vs 50% SLYV/50% MF. They might have similar loadings, but I would prefer the former. That is not true. Two funds with the same value exposure h...
by Uncorrelated
Wed Oct 30, 2019 10:38 am
Forum: Investing - Theory, News & General
Topic: How to diversify a Three Fund Portfolio in 8 steps
Replies: 66
Views: 4873

Re: How to diversify a Three Fund Portfolio in 8 steps

Why would you want to have a megacap fund with a momentum tilt when it comes with large negative size and value exposure? There are well-designed mutlifactor and small cap value funds (such as those from DFA) that have larger momentum exposure than MTUM plus positive size/value exposure. Do you hav...
by Uncorrelated
Wed Oct 30, 2019 10:16 am
Forum: Investing - Theory, News & General
Topic: How to diversify a Three Fund Portfolio in 8 steps
Replies: 66
Views: 4873

Re: How to diversify a Three Fund Portfolio in 8 steps

Forester wrote:
Wed Oct 30, 2019 9:22 am
What matters is results and MTUM delivered.
All-in amazon!

I'm sure you don't really believe that. What matters is expense ratio, factor exposure, transaction costs and tracking error. What you call results is what I would describe as recency bias.
by Uncorrelated
Wed Oct 30, 2019 8:59 am
Forum: Investing - Theory, News & General
Topic: How to diversify a Three Fund Portfolio in 8 steps
Replies: 66
Views: 4873

Re: How to diversify a Three Fund Portfolio in 8 steps

Could you rationalize the MTUM recommendation? ... Ben Felix from this youtube channel recommends 33% value, 33% small cap value and 33% broad market. See https://www.pwlcapital.com/resources/factor-investing-with-etfs/ for the paper. I don't think maximizing the diversification ratio is a good por...
by Uncorrelated
Wed Oct 30, 2019 8:27 am
Forum: Investing - Theory, News & General
Topic: How to diversify a Three Fund Portfolio in 8 steps
Replies: 66
Views: 4873

Re: How to diversify a Three Fund Portfolio in 8 steps

Could you rationalize the MTUM recommendation? I have read from other sources that momentum is difficult to capture, for example: Despite the consensus on the existence of momentum, debates still exist over the cost-effectiveness of momentum strategies. There are many challenges in trying to estimat...
by Uncorrelated
Mon Oct 28, 2019 3:40 pm
Forum: Personal Investments
Topic: Withdrawal Plan. McClung or Allocation Bands?
Replies: 47
Views: 3394

Re: Withdrawal Plan. McClung or Allocation Bands?

As some of you have already seen, I published an analysis of optimal withdrawal strategies here:

viewtopic.php?f=10&t=293469

This may be of interest to some of the readers here.
by Uncorrelated
Mon Oct 28, 2019 3:28 pm
Forum: Investing - Theory, News & General
Topic: Four International ETFs that are better diversifiers than VXUS
Replies: 54
Views: 5248

Re: Four International ETFs that are better diversifiers than VXUS

Could you indicate how this analysis was done? I get the impression that you choose these funds by backtesting them and choosing a combination that works well. I say that because you mentioned that: The more diverse portfolio would have had 21% lower volatility but only 3% lower returns, so much bet...
by Uncorrelated
Mon Oct 28, 2019 8:01 am
Forum: Investing - Theory, News & General
Topic: Optimal asset allocation strategies for retirement & saving
Replies: 28
Views: 4196

Re: Optimal asset allocation strategies for retirement & saving

I really enjoyed reading this work, and I am grateful for your efforts in generating these enlightening graphs. How sensitive are some of the earlier graphs on accumulation (specifically, 1M goal with early exit, 10k/yr) to changes in their assumptions? For example, the 1M goal with 10k/yr amounts ...
by Uncorrelated
Sun Oct 27, 2019 3:54 pm
Forum: Investing - Theory, News & General
Topic: Optimal asset allocation strategies for retirement & saving
Replies: 28
Views: 4196

Re: Optimal asset allocation strategies for retirement & saving

I've grown to like the approach that Estrada & Kritzman offer in their 2018 paper "Evaluating Retirement Strategies : A Utility-Based Approach". https://i.imgur.com/NSUjXNE.png reference image with trinity study reference image with trinity study + bonus It appears that the 0 value of this utility ...
by Uncorrelated
Sun Oct 27, 2019 2:58 pm
Forum: Investing - Theory, News & General
Topic: Optimal asset allocation strategies for retirement & saving
Replies: 28
Views: 4196

Re: Optimal asset allocation strategies for retirement & saving

Uncorrelated, it would be so simple if we knew the distribution of future returns; we don't. In your analyses, you had to make assumptions. I'm pretty sure you chose parameters closer to historical US stock and bond returns than Japan ones. So, it isn't surprising to me to see that the output of yo...
by Uncorrelated
Sun Oct 27, 2019 1:40 pm
Forum: Investing - Theory, News & General
Topic: Optimal asset allocation strategies for retirement & saving
Replies: 28
Views: 4196

Re: Optimal asset allocation strategies for retirement & saving

The 1929/4.5% example is especially interesting. The starting stock percentage is 40%, but then after the market crashes the optimal stock percentage increases to 100% by 1932. At this point, the withdrawal rate is now a much larger proportion of the smaller portfolio and the probability of success...
by Uncorrelated
Sun Oct 27, 2019 9:08 am
Forum: Investing - Theory, News & General
Topic: Optimal asset allocation strategies for retirement & saving
Replies: 28
Views: 4196

Re: Optimal asset allocation strategies for retirement & saving

I'd like to see some examples of applying your variable asset allocation to some historical data using a 4% SWR and 30 year retirement. Take some of the worst starting retirement years (1929, 1966, etc.) and show how your strategy's asset allocation would have changed for each year of retirement, f...
by Uncorrelated
Sun Oct 27, 2019 6:03 am
Forum: Investing - Theory, News & General
Topic: Optimal asset allocation strategies for retirement & saving
Replies: 28
Views: 4196

Re: Optimal asset allocation strategies for retirement & saving

The SWR model, where the retiree withdraws a constant inflation-adjusted amount from a portfolio of fluctuating assets regardless of market performance, is a broken and illogical portfolio withdrawal method. I'm glad someone mentioned this. I agree in general that trinity style utility functions ar...
by Uncorrelated
Sat Oct 26, 2019 4:34 pm
Forum: Investing - Theory, News & General
Topic: Do factors explain the benefit of int’l diversification?
Replies: 18
Views: 1775

Re: Do factors explain the benefit of int’l diversification?

You are using the factor analysis the wrong way. The international factor set should be used to test a portfolio of international stocks, but you are testing a portfolio consisting of only US stocks and a different portfolio of only developed ex-US stocks. No, the universe I used is all developed s...
by Uncorrelated
Sat Oct 26, 2019 9:46 am
Forum: Investing - Theory, News & General
Topic: [Paul Merriman: This strategy beats a total stock market fund]
Replies: 173
Views: 13432

Re: [Paul Merriman: This strategy beats a total stock market fund]

The problem with the word "asset class" is that different asset classes might not have independent risk factors. In practice this means that the distinction is vague and worthless. You want to diversify across different sources of compensated risk, not different asset classes.
by Uncorrelated
Sat Oct 26, 2019 8:34 am
Forum: Investing - Theory, News & General
Topic: Optimal asset allocation strategies for retirement & saving
Replies: 28
Views: 4196

Optimal asset allocation strategies for retirement & saving

A while ago I read about glidepaths on ERN's blog, a magical way to combat "sequence of returns risk". I don't understand sequence of returns risk, how is sequence of returns risk different from normal risk? How does a glidepath prevent sequence of returns risk? Why can nobody agree what the best gl...
by Uncorrelated
Sat Oct 26, 2019 5:03 am
Forum: Investing - Theory, News & General
Topic: Do factors explain the benefit of int’l diversification?
Replies: 18
Views: 1775

Re: Do factors explain the benefit of int’l diversification?

You are using the factor analysis the wrong way. The international factor set should be used to test a portfolio of international stocks, but you are testing a portfolio consisting of only US stocks and a different portfolio of only developed ex-US stocks. By definition the factor exposure of the su...
by Uncorrelated
Thu Oct 24, 2019 9:12 am
Forum: Investing - Theory, News & General
Topic: [Paul Merriman: This strategy beats a total stock market fund]
Replies: 173
Views: 13432

Re: [Paul Merriman: This strategy beats a total stock market fund]

long quote I have not tried to refute the existence of value premium in past data, or try to reject FF work, if earlier responses did not mention this, that is only because I was responding to specific claims of Value outperformance by other posters. When I say I am skeptical, I am in the camp of p...
by Uncorrelated
Wed Oct 23, 2019 3:32 pm
Forum: Investing - Theory, News & General
Topic: [Paul Merriman: This strategy beats a total stock market fund]
Replies: 173
Views: 13432

Re: [Paul Merriman: This strategy beats a total stock market fund]

No, that is what I said in the beginning. There has been no value premium since 2004, or very little of it. This could be because everyone found out about it and flooded the market with products that attempts to capture it. We might need to go through a really long and painful cycle that may last 3...