Bogleheads.org

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The underlying point is that one has delivered a lot of CAPM alpha while the other has not, despite theoretically loading on largely the same factors over largely the same universe of stocks. Why and how did this happen, and is it more likely than not to continue on average in the future? The autho...

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Don't take it personally. Lots of surveys that target specific demographics.

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Depends on what your advisor is charging and what other services he provides. If you're paying anywhere close to 1%, I'd get rid of him.

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It's simple. TSMOM is usually calculated as 12 month total return minus the risk-free rate. If the resulting value is positive, go long. If not, go short or "flat" (into cash). So take the 12-month trailing total return of a fund (easily obtainable through Yahoo Finance, Morningstar, and Google Fina...

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Dumb article. SPLV (and many other ETFs) gapped down on Monday morning because market makers pulled liquidity, creating huge but temporary discounts. It was a repeat of the flash crash, nothing inherent in the low-volatility construction of the portfolio.

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Brains, expertise, ethics, rapport, and a low fee.

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While I appreciate the whole terminology discussion, perhaps we could move on to the real topic for this post, which is when do these risk factor chasing strategies becomes no better than your typical active fund? Um, this entire thread is a terminology discussion. Your query: When is a factor stra...

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All DFA is doing is using a simple quantitative trading strategy that focuses on stocks with low P/B and not too much negative momentum (OK, they did recently add a profitably signal). It may be systematic, it may require no human input, but it is still at heart a quantitative trading strategy. In f...

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It's active investing as soon as you start adding tilts. That's why they're called tilts! Adding REITs is an active decision. So is favoring U.S. stocks over international stocks. Any portfolio that deviates from the global market portfolio is macro-inconsistent--meaning each dollar overweight must ...

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They've always used shorting and derivatives. None of this is new.

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This is an arbitrage many institutions take advantage of. You can try it, but it's probably not cost effective.

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Ignore the distribution yield of the fund. The underlying yield of the EM index is around 2.6%, according to MSCI.

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They're ripping you off. 1.5% is egregious.

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Fidelity and Vanguard do not have publicly traded stock. Fidelity is owned by the Johnson family; Vanguard is owned by investors in the fund like you and me.

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What's the advisor charging? If it's more than 0.5%, you're getting ripped off.

The red flag in that portfolio is the individual bond ladder. You are much better off with a low-cost mutual fund, active or passive, as the transaction costs for small bond portfolios tend to be high.

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Your advisor wants you in the Schwab account because it is most convenient for him. Most advisors deal with a single custodian that allows them to manage and bill all their accounts through one interface. Advisor custodial accounts tend to be more expensive than individual investor accounts. For exa...

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Yes. How else is he going to do his job?

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Vanguard offers low-cost advice through several options. The cheapest is Vanguard Personal Advisor Services, which charges 0.30% and requires only $100K.

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Here's an alternative: Once an initial DFA allocation is set, let it drift, and use ETFs to rebalance. In truth, most DFA funds just offer some size + value exposure on top of market beta. You can get pretty close with lots of ETFs out there. In any case, the volatility of market beta is much more s...

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IWC's performance is marred by the same problem Russell 2000 index funds face: front-running. IWC has experienced -3% annualized alpha since inception!

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Gross. The Russell 2000 is a terrible, flawed index. It loses 1% or more a year to arbitrageurs front-running the trades of funds tracking it.

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This article was surprisingly incoherent, because it mixes two distinct but related ideas: valuation ratios that explain the returns of the overall market, and valuation ratios that best explain the relative returns of individual stocks. The two papers he cites to support his selection of EV/EBITDA ...

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Wealthfront has historically used unrealistic estimates or projections to make its services look a lot better than a conservative accounting would suggest. Its estimated returns from "tax alpha" are much too high. Independent papers have found the true benefits of tax-loss-harvesting to be closer to...

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Yes. 1) Grossman-Stiglitz points out markets can't be perfectly efficient because there has to be some reward for expending resources to obtain new information. 2) Even Fama and French believe there are skilled investors, but think that it's all-but-impossible to identify them in advance. 3) Virtual...

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It's funny how Ritholtz advocates low-cost index investing when his firm charges 2% on the first $500k in assets.

You can see his firm's fee schedule here: http://www.adviserinfo.sec.gov/Iapd/Con ... _ID=267903

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DFA is great for getting deep value tilts. However, the firm's value proposition has eroded over time as cheap value + size funds have proliferated. DFA is one of the few companies to offer international small value funds and they've recently added profitability to their funds.

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Renaissance Technologies almost certainly is "beating the market."

Even Gene Fama doesn't subscribe to the rather extreme view that no one can beat the market or that no one is skilled.

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.... Yes, my letter to the National Enquirer just got printed last month. Took them a while to admit that the whole Jennifer Aniston / Alien Abduction thing could be explained by the 5-factor model. It may be non-linear, we have not really looked for that, interesting. But I'd describe it even more...

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This is awesome. I love how Cliff will comment almost anywhere. Is it fair to describe the revived small-firm effect as a quality non-linearity effect? A small quality firm that has similar metrics as a large quality firm probably has a lot more runway to invest incremental capital at above-market r...

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The functional equivalent is sector investing, which is common.

You've hit upon a good point: The way we divide and assess stocks is based on somewhat arbitrary conventions.

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As others noted, this is a shoddy piece of analysis. If you extend the period back to the PowerShares FTSE RAFI US 1000's inception, the fund handily outperforms the DFA fund. The better comparison would be to measure each fund's Fama-French alphas and loadings. Nelson could have criticized the fund...

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Understood. If I compare the Russell 3000 and the Russell 1000 I also see virtually identical annualized returns over the period 1979-2013. It was my understanding that the poor performance of the Russell 2000 index was due to front-running of stocks moving into and out of the 2000 index. Since the...

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Interesting. I went back and compared the Russell 1000 and Russell 2000 for the period 1979-2013 and found the same result, namely no meaningful difference in annualized returns between large and small stocks for the last 35 years. The R2K is a flawed index that has lost about 1% to 2% a year to it...

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A reasonable rule: When the yield on a new CD is at least as high as the yield on the current CD + the EWP amortized over the expected life the CD.

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I suspect he's not declaring stocks overvalued because interest rates are so low, meaning the spread between equity expected returns and bond expected returns is still quite reasonable.

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Technically, they are. You can trade stocks 24/7 in different venues.

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PIMCO's "PLUS" funds offer 100% exposure to equities and 100% exposure to bonds. They do this by entering into swaps that offer levered exposure to an index and investing the leftover money (the collateral) in a bond portfolio.

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European and EM value stocks.

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In 1999, small- and mid-cap stocks were part of the loathed "old economy" and their valuations hit historic relative lows. When the dotcom bubble popped, small-cap and value stocks did extraordinarily well for the next four years or so.

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If you don't understand why the fund is doing so well, you should not own it.

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It's possible to have indefinite exponential equity growth with declining GDP as long as enough of the return is consumed.

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Um, why?

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Equity earnings are generally considered real. In theory, cost increases can be passed on to consumers, leaving real earnings unchanged. However, this process can take a while and even then can lead to real losses to the owners of capital (examples include sticky prices and weak negotiating position...

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FSTMX is up 1.1%.

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exeunt I don't believe either of your two statements are accurate for example, 1970-4/14 EAFE returned 10.0 and international small returned 15.1 (dimensional small cap index, longest one I know) Sorry but Fama and French never made the claim about higher risk adjusted returns and re delisting bias...

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Few quick thoughts First Banz found that small caps for his period studied had higher risk adjusted returns. No one else, certainly not FF, has said that, just higher returns. You don't need higher risk-adjusted returns to have a factor with a premium. So that part of the paper IMO is just plain wr...

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What do you mean by "up 4.65%"? Also, for comparison, according to Samuel Lee (M*), the duration of a current 5-year CD is at most, 1.7 years, by his calculations. So, do you actually know the duration of your 10-year CD? The article was talking about bank CDs, which can be withdrawn with principal...

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Look into a CD or a HY savings account. Some banks are offering 1% to 2% yields on their FDIC-insured savings products.

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Side question... who is AQR by the way? I've never even heard of them before all the momentum threads started popping up. It's a big hedge fund shop that's pushed into mutual funds over the past 5 years. They have some of the best financial economists on their pay roll. Think of them as DFA, but no...

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^ Do you think the equity risk premium is going to be cut in half because people know about it? No, but I think its equilibrium value has fallen. Besides, it's hard to attribute value and profitability/quality to purely rational forces when value and quality are both negative correlated with each o...

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