Search found 895 matches

by exeunt
Fri Apr 08, 2016 1:34 am
Forum: Investing - Theory, News & General
Topic: Review of AQR Equity Market Neutral & Long-Short Equity
Replies: 44
Views: 7629

Re: Review of AQR Equity Market Neutral & Long-Short Equity

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 author makes an additional leap to recommend the recent winner, but for starters it's worth explaining why something won or lost over a given period in the first place. If something can win by a lot in a couple years, it can also lose by a lot too. First of all, thanks for your contributions to this thread. You've answered most of posters' criticisms and objections the same way I would have. I wrote the two articles in question. Good catch on me makin...
by exeunt
Sun Jan 17, 2016 7:11 pm
Forum: Personal Consumer Issues
Topic: Bank of America disses older clients
Replies: 24
Views: 3395

Re: Bank of America disses older clients

Don't take it personally. Lots of surveys that target specific demographics.
by exeunt
Fri Nov 20, 2015 11:26 pm
Forum: Personal Investments
Topic: [Keep DFA funds and Advisor, or go with Three-fund portfolio?]
Replies: 8
Views: 1676

Re: [Keep DFA funds and Advisor, or go with Three-fund portfolio?]

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.
by exeunt
Fri Sep 18, 2015 4:18 am
Forum: Investing - Theory, News & General
Topic: Time Series Momentum (TSMOM) calculation?
Replies: 1
Views: 1119

Re: Time Series Momentum (TSMOM) calculation?

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 Finance's API) and subtract from it the 12-month trailing total return of a fund like TBIL.

TSMOM can be calculated over arbitrary time horizons. You can use 6-month total return, 1-month total return, anything, really. You can even use price return.
by exeunt
Wed Sep 02, 2015 2:46 pm
Forum: Investing - Theory, News & General
Topic: Low Vol on "Black Monday" (ETF.com)
Replies: 1
Views: 431

Re: Low Vol on "Black Monday" (ETF.com)

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.
by exeunt
Thu Aug 27, 2015 10:21 pm
Forum: Personal Finance (Not Investing)
Topic: What would YOU want from a financial advisor?
Replies: 38
Views: 5649

Re: What would YOU want from a financial advisor?

Brains, expertise, ethics, rapport, and a low fee.
by exeunt
Mon Aug 10, 2015 10:33 pm
Forum: Investing - Theory, News & General
Topic: The line between Active vs Passive is blurring: When does chasing risk factors end?
Replies: 44
Views: 4333

Re: The line between Active vs Passive is blurring: When does chasing risk factors end?

AndroAsc wrote: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 strategy active? The answer: When it's a factor strategy. When is it bad? Answer: When it becomes too expensive. The only reason why it's so confusing is because you're using a weird definition of passive.
by exeunt
Mon Aug 10, 2015 9:42 pm
Forum: Investing - Theory, News & General
Topic: The line between Active vs Passive is blurring: When does chasing risk factors end?
Replies: 44
Views: 4333

Re: The line between Active vs Passive in blurring: When does chasing risk factors end?

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 fact, before DFA came out with it, quant funds were using value signals to generate trades. By your definition, the RAFI funds are "passive." So are equal-weight, dividend-weighted indexes, and pretty much every smart beta ETF. When Bill Sharpe talks about the arithmetic of active investment, which is commonly cited as the best argument for passive investing, he defines passive investing as thus: "A passive investor always holds eve...
by exeunt
Mon Aug 10, 2015 9:20 pm
Forum: Investing - Theory, News & General
Topic: The line between Active vs Passive is blurring: When does chasing risk factors end?
Replies: 44
Views: 4333

Re: The line between Active vs Passive in blurring: When does chasing risk factors end?

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 be matched by a dollar underweight. That is not to say these are bad decisions. The beauty of passive investing is not because it is pure and macro-consistent, it is because it's cheap and tax-efficient. Now, I know Larry calls QSPIX a "passive" fund. But if your definition of passive encompasses a high-turnover, leveraged, long-short, multi-asset strategy, your definition is useless. QSPIX may be a fine fund (in fact, I think it's a gr...
by exeunt
Tue Aug 04, 2015 6:26 pm
Forum: Investing - Theory, News & General
Topic: PIMCO PTTRX now a long-short bond fund
Replies: 7
Views: 1783

Re: PIMCO PTTRX now a long-short bond fund

They've always used shorting and derivatives. None of this is new.
by exeunt
Mon Aug 03, 2015 8:20 pm
Forum: Investing - Theory, News & General
Topic: Arbitrage opportunity when commodities futures rise over time?
Replies: 13
Views: 1559

Re: Arbitrage opportunity when commodities futures rise over time?

This is an arbitrage many institutions take advantage of. You can try it, but it's probably not cost effective.
by exeunt
Mon Aug 03, 2015 8:17 pm
Forum: Investing - Theory, News & General
Topic: VWO and 4% Dividend?
Replies: 3
Views: 2284

Re: VWO and 4% Dividend?

Ignore the distribution yield of the fund. The underlying yield of the EM index is around 2.6%, according to MSCI.
by exeunt
Mon Aug 03, 2015 5:12 pm
Forum: Investing - Theory, News & General
Topic: Financial Advisor v. Bogle Approach?
Replies: 33
Views: 5442

Re: Financial Advisor v. Bogle Approach?

They're ripping you off. 1.5% is egregious.
by exeunt
Sun Aug 02, 2015 12:43 pm
Forum: Personal Investments
Topic: Does Vanguard Have It's Own Stock?
Replies: 6
Views: 1403

Re: Does Vanguard Have It's Own Stock?

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.
by exeunt
Fri Jul 31, 2015 2:39 pm
Forum: Personal Investments
Topic: Advisor Self Interest?
Replies: 15
Views: 1808

Re: Advisor Self Interest?

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.
by exeunt
Fri Jul 31, 2015 2:33 pm
Forum: Personal Investments
Topic: Schwab vs. Fidelity vs. Vanguard for Advisor Custodian Account
Replies: 15
Views: 4700

Re: Schwab vs. Fidelity vs. Vanguard for Advisor Custodian Account

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 example, Vanguard charges $0 for Vanguard ETF and mutual fund trades. Not sure why your advisor said it's cheaper--I doubt it. Note that Vanguard does not offer advisor custodial accounts. For your advisor to manage your portfolio, he or she would have to obtain limited power of attorney over your Vanguard investment accounts. That said, if you like your advisor, don't get hung up on the custodian. The advisor's fee is many times whatever additional...
by exeunt
Sun Mar 29, 2015 2:06 am
Forum: Personal Investments
Topic: Looking for adviser
Replies: 8
Views: 1624

Re: Looking for adviser

Vanguard offers low-cost advice through several options. The cheapest is Vanguard Personal Advisor Services, which charges 0.30% and requires only $100K.
by exeunt
Tue Mar 17, 2015 10:34 pm
Forum: Investing - Theory, News & General
Topic: Looking for dirt cheap commissions on DFA funds
Replies: 27
Views: 6612

Re: Looking for dirt cheap commissions on DFA funds

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 significant than the volatility of factor premia, so it's more important to rebalance your beta allocations than to rebalance your factor allocations.
by exeunt
Tue Mar 17, 2015 12:13 am
Forum: Investing - Theory, News & General
Topic: Is MicroCap on sale?
Replies: 11
Views: 2144

Re: Is MicroCap on sale?

IWC's performance is marred by the same problem Russell 2000 index funds face: front-running. IWC has experienced -3% annualized alpha since inception!
by exeunt
Sat Mar 14, 2015 12:08 am
Forum: Investing - Theory, News & General
Topic: PXSV has changed indexes
Replies: 131
Views: 25943

Re: PXSV has changed indexes

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.
by exeunt
Sun Mar 08, 2015 7:21 pm
Forum: Investing - Theory, News & General
Topic: Barry Ritholtz view of Market Valuations
Replies: 2
Views: 874

Re: Barry Ritholtz view of Market Valuations

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 do not examine the valuation ratio's efficacy in predicting future aggregate market returns.
by exeunt
Sat Feb 07, 2015 2:01 am
Forum: Investing - Theory, News & General
Topic: "Out-Bogleing [Jack] Bogle"
Replies: 9
Views: 2399

Re: "Out-Bogleing [Jack] Bogle"

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 0.5% to 1%, which is still impressive.
by exeunt
Sat Jan 31, 2015 4:58 pm
Forum: Investing - Theory, News & General
Topic: Are there skilled investors and managers?
Replies: 25
Views: 3357

Re: Are there skilled investors and managers?

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) Virtually no respected academic believes in the caricature of EMH where no one can possibly ever be skilled.
by exeunt
Fri Jan 30, 2015 2:17 pm
Forum: Investing - Theory, News & General
Topic: Barry Ritholtz - Breaking with Bogle
Replies: 14
Views: 4375

Re: Barry Ritholtz - Breaking with Bogle

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
by exeunt
Fri Jan 30, 2015 12:18 am
Forum: Investing - Theory, News & General
Topic: Thoughts on DFA equities?
Replies: 19
Views: 3107

Re: Thoughts on DFA equities?

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.
by exeunt
Mon Jan 26, 2015 11:59 pm
Forum: Investing - Theory, News & General
Topic: Renaissance tech vs EMH
Replies: 46
Views: 6298

Re: Renaissance tech vs EMH

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.
by exeunt
Mon Jan 26, 2015 3:24 pm
Forum: Investing - Theory, News & General
Topic: Asness - The Small-Firm Effect Is Real, and It’s Spectacular
Replies: 62
Views: 10948

Re: Asness - The Small-Firm Effect Is Real, and It’s Spectac

.... 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 simply. If you just sort on size and look at the small stocks you get a disproportionate amount of junky companies (and/or the small-junky companies are even junkier than large-junky companies). Since junk underperforms quality this is a drag on small's performance. I wish it were more complicated! My favorite was when you bashed DeLong in the comments section of one of his Project Syndicate columns. The reason I came up with the quality non-lin...
by exeunt
Mon Jan 26, 2015 12:18 pm
Forum: Investing - Theory, News & General
Topic: Asness - The Small-Firm Effect Is Real, and It’s Spectacular
Replies: 62
Views: 10948

Re: Asness - The Small-Firm Effect Is Real, and It’s Spectac

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 rate of returns and this potential likely isn't fully appreciated by the market. I'm thinking Wal-Mart during the 70s and 80s.
by exeunt
Sat Jan 17, 2015 3:04 pm
Forum: Investing - Theory, News & General
Topic: Why no cult/theory/strategy of US regional stock investing?
Replies: 21
Views: 2786

Re: Why no cult/theory/strategy of US regional stock investi

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.
by exeunt
Sun Jan 11, 2015 2:07 am
Forum: Investing - Theory, News & General
Topic: Performance of fundamental indexes
Replies: 21
Views: 4993

Re: Performance of fundamental indexes

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 funds more honestly by noting that PowerShares has had trouble tracking its indexes and that the indexes themselves might be inefficient because they can trade a lot of illiquid stocks. PowerShares FTSE RAFI Emerging Markets is particularly bad.
by exeunt
Tue Dec 23, 2014 2:52 pm
Forum: Investing - Theory, News & General
Topic: Research Affiliates article on size premium
Replies: 42
Views: 6331

Re: Research Affiliates article on size premium

dkturner wrote: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 3000 index includes all of the stocks in both the L-C 1000 and S-C 2000 the front-running issue should either disappear or be greatly minimized shouldn't it?
The effects of any adds/deletes from/to the R1K should be neutralized, but the effects of the other adds/deletes would still exist (i.e. stocks that have become too small for the R2K are dropped completely and microcap stocks that have become big enough for the R2K get added).
by exeunt
Tue Dec 23, 2014 2:14 pm
Forum: Investing - Theory, News & General
Topic: Research Affiliates article on size premium
Replies: 42
Views: 6331

Re: Research Affiliates article on size premium

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 its horrendously inefficient reconstitution. You can verify this yourself by running the R2K through a FF regression: there's significant size and value, but also nasty negative alpha. What if a large company were split, on paper only, into two small companies? Suppose there is no change in operations, and imagine that one of the small companies booked all the cash flows on even-numbered days of the month, and the other one accounted for all the ca...
by exeunt
Tue Dec 09, 2014 7:50 am
Forum: Investing - Theory, News & General
Topic: CD ladder vs accepting EWP and getting a new CD
Replies: 4
Views: 834

Re: CD ladder vs accepting EWP and getting a new CD

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.
by exeunt
Sun Nov 16, 2014 5:59 am
Forum: Investing - Theory, News & General
Topic: Warren Buffett:Stocks Are In a Zone of Reasonable
Replies: 5
Views: 2405

Re: Warren Buffett:Stocks Are In a Zone of Reasonable

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.
by exeunt
Mon Oct 20, 2014 4:49 am
Forum: Investing - Theory, News & General
Topic: Just curious: What if markets were open 24/7
Replies: 8
Views: 1899

Re: Just curious: What if markets were open 24/7

Technically, they are. You can trade stocks 24/7 in different venues.
by exeunt
Sun Oct 19, 2014 3:03 am
Forum: Investing - Theory, News & General
Topic: How is PSPTX outperforming VFIAX?
Replies: 4
Views: 1060

Re: How is PSPTX outperforming VFIAX?

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.
by exeunt
Fri Oct 10, 2014 12:33 pm
Forum: Investing - Theory, News & General
Topic: is anything 'cheap' out there?
Replies: 82
Views: 17000

Re: is anything 'cheap' out there?

European and EM value stocks.
by exeunt
Wed Oct 08, 2014 8:19 pm
Forum: Investing - Theory, News & General
Topic: Accuracy of Morningstar's chart?
Replies: 4
Views: 1139

Re: Accuracy of Morningstar's chart?

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.
by exeunt
Sat Oct 04, 2014 6:41 pm
Forum: Investing - Theory, News & General
Topic: Why is this Bond fund performing so well?
Replies: 14
Views: 1949

Re: WHy is this Bond fund performing so well?

If you don't understand why the fund is doing so well, you should not own it.
by exeunt
Thu Oct 02, 2014 12:43 pm
Forum: Investing - Theory, News & General
Topic: The power of compounding - at a rate of 3% per day
Replies: 12
Views: 2736

Re: The power of compounding - at a rate of 3% per day

It's possible to have indefinite exponential equity growth with declining GDP as long as enough of the return is consumed.
by exeunt
Sat Aug 16, 2014 10:08 pm
Forum: Investing - Theory, News & General
Topic: Is earnings yield real or nominal
Replies: 6
Views: 2117

Re: Is earnings yield real or nominal

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 with labor).
by exeunt
Fri Aug 08, 2014 4:46 pm
Forum: Investing - Theory, News & General
Topic: ITOT vs FSTMX/FSTVX
Replies: 3
Views: 2109

Re: ITOT vs FSTMX/FSTVX

FSTMX is up 1.1%.
by exeunt
Thu Aug 07, 2014 5:24 am
Forum: Investing - Theory, News & General
Topic: Finding Smart Beta in the Factor Zoo
Replies: 35
Views: 4916

Re: Finding Smart Beta in the Factor Zoo

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, any market cap weighted index will have virtually no impact from delisting since by time it delists the percentage holding will be virtually zero anyway. Size doesn't have weak returns throughout the whole period, The average annual size premium has been about 2.8 percent Now has it shrunk do to better liquidity and lower spreads, I would say yes Larry 1) Fama and French, 2012, "Size, Value and Momentum in International Stock Returns"...
by exeunt
Wed Aug 06, 2014 4:41 pm
Forum: Investing - Theory, News & General
Topic: Finding Smart Beta in the Factor Zoo
Replies: 35
Views: 4916

Re: Finding Smart Beta in the Factor Zoo

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 wrong headed. In fact higher risk adjusted returns might indicate an anomaly. Second, those looking at the data on small caps IMO are making huge error of time specific problem. Banz's study period ended right as bubble in small caps was peaking 1) The whole point of a factor is that it provides a premium that cannot be explained after controlling for exposures to other factors. Value and momentum can't be explained by each other singularly or in c...
by exeunt
Fri Jul 18, 2014 8:36 pm
Forum: Investing - Theory, News & General
Topic: recent brokered CD fluctuation
Replies: 13
Views: 1562

Re: recent brokered CD fluctuation

pascalwager wrote: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 and accrued interest (minus a penalty) intact at any time. Brokered CDs have duration like any other bond.
by exeunt
Wed Jun 11, 2014 3:26 pm
Forum: Investing - Theory, News & General
Topic: Which Vanguard Short Treasury Fund
Replies: 38
Views: 7385

Re: Which Vanguard Short Treasury Fund

Look into a CD or a HY savings account. Some banks are offering 1% to 2% yields on their FDIC-insured savings products.
by exeunt
Tue Jun 10, 2014 4:18 pm
Forum: Investing - Theory, News & General
Topic: RAFI SV/AQR SC Momentum vs AQR Core (PXSV/ASMOX vs QSMLX)
Replies: 23
Views: 3251

Re: RAFI SV/AQR SC Momentum vs AQR Core (PXSV/ASMOX vs QSMLX

caklim00 wrote: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 not run by fossils.
by exeunt
Mon Jun 09, 2014 11:18 am
Forum: Investing - Theory, News & General
Topic: RAFI SV/AQR SC Momentum vs AQR Core (PXSV/ASMOX vs QSMLX)
Replies: 23
Views: 3251

Re: RAFI SV/AQR SC Momentum vs AQR Core (PXSV/ASMOX vs QSMLX

grap0013 wrote:^ 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 other.