## Search found 318 matches

- Wed Jun 13, 2018 10:44 am
- Forum: Investing - Theory, News & General
- Topic: Why does CAPM make sense?
- Replies:
**23** - Views:
**1281**

### Re: Why does CAPM make sense?

(For an arbitrarily chosen stock) Thirty years from today, assuming some fixed net profit margin, the revenue growth is going to be the major factor determining the price then. If the company grows by 10x in revenue over the next thirty years, sure the stock will do great. If it goes down by 50% in...

- Sat May 05, 2018 9:06 am
- Forum: Investing - Theory, News & General
- Topic: NAME for the MPT or CAPM-based diagram with the hyperbola and tangent line?
- Replies:
**114** - Views:
**8144**

### Re: NAME for the MPT or CAPM-based diagram with the hyperbola and tangent line?

Camontgo, is the upper line of the V (hyperbola-through-the-cone-focus) in your second chart, the tangent line to the curve in your first chart? I don't think so. I think I'd need to add an additional asset with near zero SD to the Markowitz framework, rather than moving one of the original assets,...

- Fri May 04, 2018 10:03 am
- Forum: Investing - Theory, News & General
- Topic: NAME for the MPT or CAPM-based diagram with the hyperbola and tangent line?
- Replies:
**114** - Views:
**8144**

### Re: NAME for the MPT or CAPM-based diagram with the hyperbola and tangent line?

I am trying (and not succeeding) to visualize what happens in three-space if you have a surface representing the efficient frontier for three risky assets, and you move one of the assets so that it becomes less and less risky and finally becomes riskless. I think the tangent-line diagram is just a ...

- Tue Oct 10, 2017 4:33 pm
- Forum: Personal Consumer Issues
- Topic: Best weight loss resources?
- Replies:
**54** - Views:
**4034**

### Re: Best weight loss resources?

I lost over 80lbs in 2014, and I've kept it off since. I watched my diet very carefully (tracked all food and exercise in the myfitnesspal app) while losing the weight. I've also become a bit of a triathlon fanatic over the past few years, and that has helped with maintaining my weight. I read quite...

- Fri Jan 06, 2017 6:03 pm
- Forum: Investing - Theory, News & General
- Topic: Research Paper Request: Active Manager Performance
- Replies:
**8** - Views:
**811**

### Re: Research Paper Request: Active Manager Performance

A very clearly written paper is Bogle's "Selecting Equity Mutual Funds" from the Journal of Portfolio Management (1992). Unfortunately, I can't find a link to an un-gated link to this paper...but here are some of my notes. Bogle uses the annual Honor Roll published by Forbes as the basis for mutual ...

- Tue Nov 22, 2016 6:26 pm
- Forum: Investing - Theory, News & General
- Topic: Fama-French factors, "financials," and DFA funds
- Replies:
**6** - Views:
**1378**

### Re: Fama-French factors, "financials," and DFA funds

This is a good question. I don't know the answer, but I don't think it is inconsistent that the best process for constructing a "small" or "value" investment portfolio may be different from the process of constructing the FF factors (HML and SMB). Fama and French sort stocks using characteristics (l...

- Fri Oct 21, 2016 9:18 am
- Forum: Investing - Theory, News & General
- Topic: Humble Giants - Interview with Vanguard's Gerry O'Reilly and Jim Rowley
- Replies:
**3** - Views:
**814**

### Humble Giants - Interview with Vanguard's Gerry O'Reilly and Jim Rowley

Excellent podcast interview with Vanguard Index Portfolio managers. http://investorfieldguide.com/vanguard/ Some very interesting discussion on variety of topics frequently discussed on this forum such as: liquidity in smaller stocks, index construction, market structure, high frequency trading, Van...

- Thu Oct 13, 2016 9:19 pm
- Forum: Investing - Theory, News & General
- Topic: Cliff Asness - Turning Over Accepted Wisdom with Turnover
- Replies:
**29** - Views:
**4187**

### Re: Cliff Asness - Turning Over Accepted Wisdom with Turnover

My take-aways: 1. In Sharpe's analysis, passive investors don't rely on active investors for indexing to work well. 2. In Pedersen's analysis, some trading is always necessary for a cap weighted index of the "the market". The cost of this trading may be quite small if there is a large pool of active...

- Wed Apr 01, 2015 11:23 am
- Forum: Personal Consumer Issues
- Topic: Pull-ups and Push-ups
- Replies:
**414** - Views:
**101061**

### Re: Pull-ups and Push-ups

I've managed to go from zero pull-ups to 4 pull-ups in about a month after being inspired by some of the earlier discussions on this thread. Still an embarrassingly low number, but things are moving in the right direction. I think I'm still in the stage where gains come relatively easy! My fitness g...

- Mon Jan 26, 2015 10:52 pm
- Forum: Investing - Theory, News & General
- Topic: Effect of 0.79 correlation: fantasy vs. reality
- Replies:
**58** - Views:
**6957**

### Re: Effect of 0.79 correlation: fantasy vs. reality

For those who are skilled at this sort of thing, would it be possible/practical to create something along the lines of an efficient frontier time-lapse video (or gif)? Or is that the sort of thing that would take a huge amount of time? If not, I think it'd be super neat as a way to get across the m...

- Mon Jan 26, 2015 3:38 pm
- Forum: Investing - Theory, News & General
- Topic: Effect of 0.79 correlation: fantasy vs. reality
- Replies:
**58** - Views:
**6957**

### Re: Effect of 0.79 correlation: fantasy vs. reality

Yes, thanks, fixed it.Beliavsky wrote:I think "alpha can be less than 0" was meant.camontgo wrote:Actually, in theory, alpha can be less than 1, but then you'd need to short the fund to increase your Sharpe Ratio.

- Mon Dec 22, 2014 12:33 pm
- Forum: Investing - Theory, News & General
- Topic: Asness response to value redundancy
- Replies:
**47** - Views:
**8044**

### Re: Asness response to value redundancy

Very interesting read and nice to see that value isn't dead and that there are sort of investment products that capture all 5 of those metrics. (mkt, smb, hml, rmw, umd). In a recent interview, Gene Fama said the following... "...once you get beyond two dimensions of expected returns, the third add...

- Sat Dec 20, 2014 1:50 pm
- Forum: Investing - Theory, News & General
- Topic: Effect of 0.79 correlation: fantasy vs. reality
- Replies:
**58** - Views:
**6957**

### Re: Effect of 0.79 correlation: fantasy vs. reality

People are apt to say "well, the lower the better, but anything that isn't 1.0 is still helpful ." I think that if the goal is maximizing Sharpe Ratio, any fund added needs to have a positive alpha (relative to the benchmark) to be "helpful"....not just a correlation less than 1.0. Actually, in the...

- Thu Aug 14, 2014 11:38 am
- Forum: Investing - Help with Personal Investments
- Topic: Good Harbor and F-Squared
- Replies:
**17** - Views:
**2433**

### Re: Good Harbor and F-Squared

There are some earlier discussion on Good Harbor: My thoughts are included in this one : http://www.bogleheads.org/forum/viewtopic.php?f=1&t=115155 There was also some discussion around a WSJ article suggesting that traders were front running GH's trades... http://www.bogleheads.org/forum/viewtopic....

- Tue Jul 01, 2014 11:02 am
- Forum: Personal Consumer Issues
- Topic: burning 1 lb is how many calories?
- Replies:
**69** - Views:
**8097**

### Re: burning 1 lb is how many calories?

I've lost 50lbs+ over the past 7 months through exercise and counting calories with a fitness app. Back at my high school weight now :happy Calorie tracking involves a lot of estimating and there are many complicating factors, but I've nevertheless found the rule that a 3500 calorie deficit equals 1...

- Tue Apr 22, 2014 10:55 am
- Forum: Investing - Theory, News & General
- Topic: Is 1800s stock market data even relevant?
- Replies:
**63** - Views:
**6551**

### Re: Is 1800s stock market data even relevant?

The current situation is never an especially close match with any historical time. As we go back further, the differences are greater, and the data accuracy is more suspect. The 1800s data may be irrelevant for calculating a "Siegel Constant" or running a PE10 expected return regression. Although, i...

- Wed Apr 09, 2014 1:15 pm
- Forum: Investing - Theory, News & General
- Topic: BH Greatest Hits: PE10 predictive power
- Replies:
**39** - Views:
**6845**

### Re: BH Greatest Hits: PE10 predicitive power

I believe this maps to my interpretation of DeLong in http://www.bogleheads.org/forum/viewtopic.php?p=2023098#p2023098 Do you disagree with that post? Following the link: He's (DeLong) saying the only possible choices are (1) p/e predicts returns, (2) p/e predicts earnings/dividend growth, (3) the ...

- Wed Apr 09, 2014 11:31 am
- Forum: Investing - Theory, News & General
- Topic: BH Greatest Hits: PE10 predictive power
- Replies:
**39** - Views:
**6845**

### Re: BH Greatest Hits: PE10 predicitive power

If we combine the two adjustments of 1 for the lower dividend payout and 4 for the FSB 142 change, the current CAPE 10 at 24.9 which looks way above the mean, doesn’t look so overvalued at a now 19.9. In fact, that’s right about in line with it’s average since 1960. Which begs the questions: a) Are...

- Wed Apr 09, 2014 10:49 am
- Forum: Investing - Theory, News & General
- Topic: BH Greatest Hits: PE10 predictive power
- Replies:
**39** - Views:
**6845**

### Re: BH Greatest Hits: PE10 predicitive power

One major difference between the two cases is that in the first instance we had a constant underlying distribution while in the later case the underlying distribution could change over time. Yes, it will change over time. It could be that the market is more risky at some times than others, and this...

- Wed Apr 09, 2014 9:31 am
- Forum: Investing - Theory, News & General
- Topic: BH Greatest Hits: PE10 predictive power
- Replies:
**39** - Views:
**6845**

### Re: BH Greatest Hits: PE10 predicitive power

How does one prove dividend growth has not been forecastable by the market? Perhaps the price of risk has changed? Assuming dividend growth is not forecastable, does that necessarily mean that returns are forecastable? Why? Example: Suppose I purchase the opportunity to draw a "payoff" from some di...

- Fri Apr 04, 2014 11:39 am
- Forum: Investing - Theory, News & General
- Topic: Gordon equation-stock buybacks
- Replies:
**11** - Views:
**1361**

### Re: Gordon equation-stock buybacks

I would be interested to hear how Bernstein and others think buybacks factor into the expected return on stocks under the Gordon equation. Bernstein wrote a paper with Robert Arnott in 2003 that had a very good discussion on the net effect of buybacks and dilution. http://portfolioconstruction.com....

- Mon Jan 06, 2014 11:26 am
- Forum: Investing - Theory, News & General
- Topic: Expected Future Market Returns
- Replies:
**32** - Views:
**3863**

### Re: Expected Future Market Returns

According to a Vanguard study, PE and Shiller's 10 year PE are the best forecasts of future market returns. Vanguard says they have done equally well, but only explain about 40%. In other words, they are the best methods but are not very good. I've run the regressions myself, and, as Vanguard's res...

- Mon Jan 06, 2014 10:29 am
- Forum: Investing - Theory, News & General
- Topic: Expected Future Market Returns
- Replies:
**32** - Views:
**3863**

### Re: Expected Future Market Returns

Here is a free collection of papers discussing the equity risk premium. Includes papers from prominent academics and practitioners. It is a couple years old now, but still an interesting read: http://www.cfainstitute.org/learning/products/publications/contributed/Pages/rethinking_the_equity_risk_pre...

- Sun Dec 22, 2013 9:36 pm
- Forum: Investing - Theory, News & General
- Topic: The Single Greatest Predictor of Future Stock Market Returns
- Replies:
**40** - Views:
**10558**

### Re: The Single Greatest Predictor of Future Stock Market Ret

The author has now posted a new post which includes a critique of his earlier post...another interesting read

http://philosophicaleconomics.wordpress ... e-fitting/

http://philosophicaleconomics.wordpress ... e-fitting/

- Sun Dec 22, 2013 3:33 pm
- Forum: Investing - Theory, News & General
- Topic: Interesting article about CAPE/ PE10
- Replies:
**16** - Views:
**3316**

### Re: Interesting article about CAPE/ PE10

Wow--that was perhaps the most interesting finance article I've read all year. A purely mathematical way of thinking about what returns one can reasonably expect apart from any judgement as to what level the market "should" trade at. I'd like to use the numbers he was using from FRED and tinker wit...

- Sat Dec 21, 2013 12:14 pm
- Forum: Investing - Theory, News & General
- Topic: Interesting article about CAPE/ PE10
- Replies:
**16** - Views:
**3316**

### Re: Interesting article about CAPE/ PE10

This is a very interesting blog. The Shiller PE post is excellent, but the newest post is even more thought provoking. It presents a new indicator of "future returns" that I had not seen before, and it has a very interesting (and extremely long) explanation of why it works. http://philosophicalecono...

- Tue Dec 17, 2013 2:21 pm
- Forum: Personal Consumer Issues
- Topic: Mega Millions jackpot to $636 million
- Replies:
**82** - Views:
**6065**

### Re: Mega Millions jackpot to $636 million

According to this analysis, the expected value of a ticket actually goes down when the jackpot is at record levels....because the number of tickets sold grows super-linearly vs. jackpot size so the probability of ties increases more rapidly than the expected payout. http://www.circlemud.org/jelson/m...

- Sun Dec 08, 2013 6:11 pm
- Forum: Investing - Theory, News & General
- Topic: Math q's about "rotated" eff. front. charts like Rick's
- Replies:
**2** - Views:
**498**

### Re: Math q's about "rotated" eff. front. charts like Rick's

I think the arithmetic mean to geometric mean change results in something more complex than a simple rotation of the standard efficient frontier. In my approximation of Rick's curve in the previous thread, I subtracted 0.5*sigma^2 from each return...which is subtracting a parabola shape. The 0.5*sig...

- Fri Dec 06, 2013 4:24 pm
- Forum: Investing - Theory, News & General
- Topic: Math question about Rick Ferri's efficient frontier curve
- Replies:
**45** - Views:
**4847**

### Re: Math question about Rick Ferri's efficient frontier curv

By the way, in your chart, to my eyeball it looks as if there is just the tiniest bit of actual decline in return at the 100%-US end? That is, the return for 85% U.S. 15% foreign is higher, not just in risk-adjusted return (tangent line), but in just plain old return? Yes, there is a small decline ...

- Fri Dec 06, 2013 3:04 pm
- Forum: Investing - Theory, News & General
- Topic: Math question about Rick Ferri's efficient frontier curve
- Replies:
**45** - Views:
**4847**

### Re: Math question about Rick Ferri's efficient frontier curv

That's basically correct. The total rate of return is calculated by using an IRR on the ending value of each $10,000 portfolio over the Jan 1970 - October 2013 period. The standard deviation is annualized using monthly returns for each portfolio over the same period. Rick Ferri So, the IRR is givin...

- Wed Dec 04, 2013 3:47 pm
- Forum: Investing - Theory, News & General
- Topic: Math question about Rick Ferri's efficient frontier curve
- Replies:
**45** - Views:
**4847**

### Re: Math question about Rick Ferri's efficient frontier curv

The textbook Markowitz efficient frontier is a single period model which uses arithmetic mean returns. It is symmetric about a horizontal line through the minimum variance portfolio. It is true that the single period analysis can be misleading if not interpreted carefully (for example, the high vari...

- Wed Dec 04, 2013 12:01 pm
- Forum: Investing - Theory, News & General
- Topic: Math question about Rick Ferri's efficient frontier curve
- Replies:
**45** - Views:
**4847**

### Re: Math question about Rick Ferri's efficient frontier curv

If calculated by the textbook method, the efficient frontier plot should be symmetric about a horizontal line going with the minimum variance portfolio. Bill Sharpe has the equations posted for two risky assets here: http://www.stanford.edu/~wfsharpe/mia/rr/mia_rr5.htm The expected return (y-values...

- Wed Dec 04, 2013 10:58 am
- Forum: Investing - Theory, News & General
- Topic: Math question about Rick Ferri's efficient frontier curve
- Replies:
**45** - Views:
**4847**

### Re: Math question about Rick Ferri's efficient frontier curv

If calculated by the textbook method, the efficient frontier plot should be symmetric about a horizontal line going with the minimum variance portfolio. Bill Sharpe has the equations posted for two risky assets here: http://www.stanford.edu/~wfsharpe/mia/rr/mia_rr5.htm The expected return (y-values)...

- Tue Nov 26, 2013 1:56 pm
- Forum: Investing - Theory, News & General
- Topic: Due diligence on RAFI Pure Small Value
- Replies:
**189** - Views:
**25150**

### Re: Due diligence on RAFI Pure Small Value

Robert T,

Thanks for the additional analysis! Looks like the fund is worth watching as a potential SCV option.

Thanks for the additional analysis! Looks like the fund is worth watching as a potential SCV option.

- Tue Nov 26, 2013 12:19 pm
- Forum: Investing - Theory, News & General
- Topic: Due diligence on RAFI Pure Small Value
- Replies:
**189** - Views:
**25150**

### Re: Due diligence on RAFI Pure Small Value

The factor loadings and positive alpha look attractive, but there has been a lot written about other RAFI funds benefiting from the fortuitous timing of their index reconstitution in 2009. Based on the table in the original post, 2009 looks extreme for this index as well. It would be interesting to ...

- Thu Nov 21, 2013 2:34 pm
- Forum: Investing - Help with Personal Investments
- Topic: what is the formula?
- Replies:
**12** - Views:
**1185**

### Re: what is the formula?

Grt2bOutdoors, thanks for the answer. But is there a formula where similar numbers can be plugged in while using a basic handheld calculator? If you want to calculate with a handheld calculator, you can use the equation here: http://www.financeformulas.net/Number-of-Periods-of-Annuity-from-Present-...

- Thu Nov 14, 2013 12:07 pm
- Forum: Investing - Theory, News & General
- Topic: "There is a rebalancing bonus ... false"
- Replies:
**188** - Views:
**20578**

### Re: "There is a rebalancing bonus ... false"

Which isn't much different in the two cases with 20% sd because most of the benefit is captured just from having the starting 50/50 balance. The median looks significantly higher to me. As does the CAGR. And both of those are what matter in terms of making a real world decision. The CAGR is 0.1% hi...

- Thu Nov 14, 2013 11:38 am
- Forum: Investing - Theory, News & General
- Topic: "There is a rebalancing bonus ... false"
- Replies:
**188** - Views:
**20578**

### Re: "There is a rebalancing bonus ... false"

I'm still concerned about your median outcome being higher while your mean isn't. For a normal distribution, that shouldn't happen. The returns are drawn from a normal distribution. The final wealth is based on the compounding of these random returns over multiple periods, it isn't normal, it's rig...

- Thu Nov 14, 2013 11:21 am
- Forum: Investing - Theory, News & General
- Topic: "There is a rebalancing bonus ... false"
- Replies:
**188** - Views:
**20578**

### Re: "There is a rebalancing bonus ... false"

I'm still concerned about your median outcome being higher while your mean isn't. For a normal distribution, that shouldn't happen. The returns are drawn from a normal distribution. The final wealth is based on the compounding of these random returns over multiple periods, it isn't normal, it's rig...

- Thu Nov 14, 2013 8:18 am
- Forum: Investing - Theory, News & General
- Topic: "There is a rebalancing bonus ... false"
- Replies:
**188** - Views:
**20578**

### Re: "There is a rebalancing bonus ... false"

Yes, the variance in outcomes is higher with no rebalancing than it is with rebalancing. It isn't a very big difference for the parameters I'm using, but the difference grows as I increase volatility. I've already noted that I agree rebalancing reduces risk and it improves the median outcome. Both o...

- Wed Nov 13, 2013 4:41 pm
- Forum: Investing - Theory, News & General
- Topic: "There is a rebalancing bonus ... false"
- Replies:
**188** - Views:
**20578**

### Re: "There is a rebalancing bonus ... false"

The point is that volatility hurts and that arithmetic averages are meaningless to multi-period investing. You seem to have gotten the later point, but missed the former. This a key point where we disagree. I agree with you that, when looking at specific sequence of returns, the geometric mean of t...

- Wed Nov 13, 2013 2:11 pm
- Forum: Investing - Theory, News & General
- Topic: "There is a rebalancing bonus ... false"
- Replies:
**188** - Views:
**20578**

### Re: "There is a rebalancing bonus ... false"

That's not true. And the coin-flipping example above illustrates this. Here is my analysis of a coin flip example: Example: We flip a coin with a 100% return for heads, and a -50% return for tails. We make 100 flips with an initial bet of $1 and parlay the winnings. Compare rebalancing between two ...

- Wed Nov 13, 2013 2:04 pm
- Forum: Investing - Theory, News & General
- Topic: "There is a rebalancing bonus ... false"
- Replies:
**188** - Views:
**20578**

### Re: "There is a rebalancing bonus ... false"

That's not true. And the coin-flipping example above illustrates this. Here is my analysis of a coin flip example: Example: We flip a coin with a 100% return for heads, and a -50% return for tails. We make 100 flips with an initial bet of $1 and parlay the winnings. Compare rebalancing between two ...

- Wed Nov 13, 2013 12:29 pm
- Forum: Investing - Theory, News & General
- Topic: "There is a rebalancing bonus ... false"
- Replies:
**188** - Views:
**20578**

### Re: "There is a rebalancing bonus ... false"

It would be luck if the rebalancing strategy sometimes had better asset allocation and sometimes had worse asset allocation. However, if the returns of the two assets aren't identical, then the rebalancing strategy always has the inferior allocation (its never better).... That's not true. And the c...

- Wed Nov 13, 2013 12:10 pm
- Forum: Investing - Theory, News & General
- Topic: "There is a rebalancing bonus ... false"
- Replies:
**188** - Views:
**20578**

### Re: "There is a rebalancing bonus ... false"

I don't disagree with that. However, a practical rebalancing strategy loses an offsetting amount (on average) by holding an inferior (ex-post) asset allocation in all instances where the asset returns diverge over full the holding period. It only loses due to dumb luck. And you can't retire on luck...

- Tue Nov 12, 2013 2:15 pm
- Forum: Investing - Theory, News & General
- Topic: "There is a rebalancing bonus ... false"
- Replies:
**188** - Views:
**20578**

### Re: "There is a rebalancing bonus ... false"

I think the first term will always be positive, and the second term will always be negative for the scenarios I'm simulating. However, I don't (yet) understand how we can separate these two components in practice. I think we'd need uncorrelated assets which were guaranteed not to diverge. We do thi...

- Tue Nov 12, 2013 10:38 am
- Forum: Investing - Theory, News & General
- Topic: "There is a rebalancing bonus ... false"
- Replies:
**188** - Views:
**20578**

### Re: "There is a rebalancing bonus ... false"

I think you guys are talking past each other because you are interested in different questions. Any given observer, such as myself simply has to decide which questions (one, or both or neither) they are interested in. Yes, I think we are asking/answering different questions. I still think my approa...

- Mon Nov 11, 2013 6:07 pm
- Forum: Investing - Theory, News & General
- Topic: "There is a rebalancing bonus ... false"
- Replies:
**188** - Views:
**20578**

### Re: "There is a rebalancing bonus ... false"

You have to take out the effect of shifting allocations (say by comparing the non-rebalanced portfolio to a rebalanced one with the dollar averaged allocation you ended up with) in order for the effect to not be obscured by things with much larger effect sizes. I'd need to work through it, but I ca...

- Mon Nov 11, 2013 5:35 pm
- Forum: Investing - Theory, News & General
- Topic: "There is a rebalancing bonus ... false"
- Replies:
**188** - Views:
**20578**

### Re: "There is a rebalancing bonus ... false"

Now the problem is apparent. You are attributing losses that come from your allocation (having money invested in something that lost money) to rebalancing. I'm assuming I invest in two assets that have the same mean and expected return. The assets follow a random walk...so they aren't guaranteed to...

- Mon Nov 11, 2013 5:10 pm
- Forum: Investing - Theory, News & General
- Topic: "There is a rebalancing bonus ... false"
- Replies:
**188** - Views:
**20578**

### Re: "There is a rebalancing bonus ... false"

Using a back of the book calculation, the standard deviation of a 50/50 portfolio should be ~14% and with a 10% return, using the approximation that says that geo mean = arith mean - variance * .5, the CAGR of the combined portfolio should be 10%-14%^2*.5 = 9% (vs 8% for no rebalancing which in the...