Search found 413 matches
- Sun Feb 10, 2013 9:06 pm
- Forum: Investing - Theory, News & General
- Topic: Small/Value Tilt question
- Replies: 27
- Views: 4035
Re: Small/Value Tilt question
No need to give up. Take a crack at a little reading.
- Sun Feb 10, 2013 8:44 pm
- Forum: Investing - Theory, News & General
- Topic: Small/Value Tilt question
- Replies: 27
- Views: 4035
Re: Small/Value Tilt question
Chan_va
I would say most people (including myself) think it is not a free lunch. It is simply a risk not captured by volatility (or CAPM beta). Such as exposure to unemployment risk etc.
I would say most people (including myself) think it is not a free lunch. It is simply a risk not captured by volatility (or CAPM beta). Such as exposure to unemployment risk etc.
- Sun Feb 10, 2013 8:31 pm
- Forum: Investing - Theory, News & General
- Topic: Small/Value Tilt question
- Replies: 27
- Views: 4035
Re: Small/Value Tilt question
Yes1. Am I understanding this right?
This is rich debate in finance. One possible explanation is that risk is not completely captured by volatility or covariance with the stock market as a whole.2. If I am, then why would we expect this to continue in the future? Now that the research is public, shouldn't this be priced into the stocks going forward?
For example, suppose small cap and value companies are more likely to do badly (compared to large and growth stocks) when there is high unemployment. If so you would need more reward to be persuaded to hold these stocks, as you don't want your financial wealth to crash at the same time you lose your job.
- Sun Feb 10, 2013 5:00 pm
- Forum: Investing - Theory, News & General
- Topic: VTWV [Anyone Own Vg Russell 2000 Value Index ETF?]
- Replies: 10
- Views: 3067
Re: VTWV [Anyone Own Vg Russell 2000 Value Index ETF?]
Thanks for the info. In that case, assuming the front running issue is no longer an issue for Russell 2000, that may be a better choice than VIOV.
Does anyone know about the current status of frontrunning of the Russell 2000?
Also, any idea what the new fees will be on the CRSP indexes?
Does anyone know about the current status of frontrunning of the Russell 2000?
Also, any idea what the new fees will be on the CRSP indexes?
- Sun Feb 10, 2013 10:12 am
- Forum: Investing - Theory, News & General
- Topic: Factor Loadings on New Vanguard CRSP Value Benchmarks
- Replies: 6
- Views: 1669
Re: Factor Loadings on New Vanguard CRSP Value Benchmarks
seeI don't know much about some of these variables. I know what Alpha is, but not MrkRF, SMB, HML, and UMD. What are they?
http://www.bogleheads.org/wiki/Fama_and ... ctor_Model
Alpha, MkTRF, SMB, HML, MomAnd how do those variables in CRSP SCV (in what will be VBR) compare to the other SCVfunds used by Bogleheads, including the super-valuey RZV? -Thanks!
RZV 0.000 0.999 0.900 1.091 -0.299
VBR 0.000 0.914 0.424 0.673 -0.077
VIOV -0.002 0.947 0.608 0.605 -0.063
These numbers are for the indexes not the live funds and are calculated from data back to the 1990s
- Sat Feb 09, 2013 9:47 pm
- Forum: Investing - Theory, News & General
- Topic: Factor Loadings on New Vanguard CRSP Value Benchmarks
- Replies: 6
- Views: 1669
Re: Factor Loadings on New Vanguard CRSP Value Benchmarks
I am confused that is what I posted. Do you mean growth funds?What about the change for the value index fund?
http://www.crsp.com/indexes/index-const ... lists.htmlIs there a similar database for int'l equities as well?
Here is the website. I don't really trust the international factor loads any time I have tried to run them.
- Sat Feb 09, 2013 8:50 pm
- Forum: Investing - Theory, News & General
- Topic: Factor Loadings on New Vanguard CRSP Value Benchmarks
- Replies: 6
- Views: 1669
Re: Factor Loadings on New Vanguard CRSP Value Benchmarks
Haha. You make a good point. Guess that is reason number 1000000 I am not in charge of vanguard.
- Sat Feb 09, 2013 7:37 pm
- Forum: Investing - Theory, News & General
- Topic: Factor Loadings on New Vanguard CRSP Value Benchmarks
- Replies: 6
- Views: 1669
Factor Loadings on New Vanguard CRSP Value Benchmarks
In case anyone is interested I ran 4 Factor regressions on the new vanguard funds.
The data is from the CRSP website, the sample period is Jully 2000 to end of 2011
I was hoping for funds with extra value factor, but not much different form the current MSCI benchmark.
The data is from the CRSP website, the sample period is Jully 2000 to end of 2011
Code: Select all
Alpha, MrkRF, SMB, HML, UMD
CRSP LCV 0.000 0.913 -0.201 0.225 -0.034
CRSP MCV 0.001 0.919 0.230 0.398 -0.051
CRSP SCV 0.001 0.909 0.572 0.484 -0.047
- Sat Feb 09, 2013 9:45 am
- Forum: Investing - Theory, News & General
- Topic: VTWV [Anyone Own Vg Russell 2000 Value Index ETF?]
- Replies: 10
- Views: 3067
Re: VTWV [Anyone Own Vg Russell 2000 Value Index ETF?]
I think it is because the S&P 600 Value Fund, VIOV gives you a similar tilt with lower expense ratio vs Russell 2000 value.
There is also this front running issue. That has scared me from it.
Here are the 4 factor loadings from the funds that folllow each index (VBR, IJS/VIOV, IWN/VTWV)
MSCI SCV has 1000 stocks
S&P 600 value has 446 stocks
Russell 2000 has 1400 stocks.
VBR is switching from MSCI SCV to CRSP SCV
With MKTRF, SMB, HML, UMD loadings of
0.909 0.572 0.484 -0.047
There is also this front running issue. That has scared me from it.
Here are the 4 factor loadings from the funds that folllow each index (VBR, IJS/VIOV, IWN/VTWV)
Code: Select all
VG ER, Fund, MKTRF, SMB, HML, UMD
0.21 MSCI SCV -0.001 0.937 0.629 0.399 -0.081
0.24 S&P 600 Value -0.002 0.882 0.897 0.393 -0.017
0.32 Russell 2000 Value -0.001 0.902 0.778 0.512 0.017
S&P 600 value has 446 stocks
Russell 2000 has 1400 stocks.
VBR is switching from MSCI SCV to CRSP SCV
With MKTRF, SMB, HML, UMD loadings of
0.909 0.572 0.484 -0.047
- Fri Feb 08, 2013 10:56 pm
- Forum: Investing - Theory, News & General
- Topic: VTWV [Anyone Own Vg Russell 2000 Value Index ETF?]
- Replies: 10
- Views: 3067
Re: VTWV [Anyone Own Vg Russell 2000 Value Index ETF?]
For what its worth Russel 2000 Value is more Valuey and Smaller than VBR.
So if that is what you are looking the 11 bp in terms of expense ratio per exposure to risk factor, you probably don't do any worse with the Russell 2000.
There has been some talk about investors front running the Russell 2000 when it re-balances. Not sure if this is still an issue.
So if that is what you are looking the 11 bp in terms of expense ratio per exposure to risk factor, you probably don't do any worse with the Russell 2000.
There has been some talk about investors front running the Russell 2000 when it re-balances. Not sure if this is still an issue.
- Sun Jan 13, 2013 10:05 am
- Forum: Investing - Theory, News & General
- Topic: New tax on French equities purchases.
- Replies: 4
- Views: 860
Re: New tax on French equities purchases.
This effectively raises the bid-ask spread of french stocks, which in turn should lower their liquidity.
This should cause investors to demand a higher risk premium (i.e., immediate price drop, long term expected higher return).
This should cause investors to demand a higher risk premium (i.e., immediate price drop, long term expected higher return).
- Wed Dec 12, 2012 9:49 am
- Forum: Investing - Theory, News & General
- Topic: Are REITS overvalued?
- Replies: 20
- Views: 4871
Re: Are REITS overvalued?
Yes this is very interesting. The numbers are so off it seems to reflect some weird aspect of the accounting. Especially as reits have not had some sort of wild runnup. There returns have been consistant with other small/valuey asset classets.
- Sun Dec 09, 2012 9:43 am
- Forum: Investing - Theory, News & General
- Topic: International SCV just got cheaper
- Replies: 22
- Views: 3638
Re: International SCV just got cheaper
grap0013 wrote: Those are indirect concerns. VSS trails its index by about ~0.3%. PDN used to trail its index by about ~1%. With the ER reduction it should only trail it's index by ~0.7%. Difference ~0.4% between VSS and PDN. Let's say PDN's value factor load is 0.35 (which I think is resonable) and assume value premium is 4. Small they are pretty close. 0.35 (factor load) X 4 (value premium) = 1.4 1.4 - 0.4 (extra PDN fees/turnover) = 1 PDN has a ~1% expected higher return than VSS (for the developed international component of VSS). That assumes no value load on VSS. I recall Robert T estimated a 0.2 value load on SCZ, which has similar M* style boxes as VSS. I also wonder if 4% value premium is too high given lower expected returns on eq...
- Fri Dec 07, 2012 2:46 pm
- Forum: Investing - Theory, News & General
- Topic: International SCV just got cheaper
- Replies: 22
- Views: 3638
Re: International SCV just got cheaper
On the subject of PDN being not great...
PDN
Size: 1.703B
Price/Book: 0.94
Price/Earning: 11.64
VSS
Size: 1.242
Price/Book: 1.09
Price/Earning: 11.99
So slightly more value exposure, less small exposure.
One day there will be a real international small value out there
PDN
Size: 1.703B
Price/Book: 0.94
Price/Earning: 11.64
VSS
Size: 1.242
Price/Book: 1.09
Price/Earning: 11.99
So slightly more value exposure, less small exposure.
One day there will be a real international small value out there
- Sat Oct 20, 2012 2:34 pm
- Forum: Investing - Theory, News & General
- Topic: Curious – Vanguard vs. iShares - S&P600 Value
- Replies: 2
- Views: 737
Re: Curious – Vanguard vs. iShares - S&P600 Value
VIOX is thinly traded and often trades at a large premium/discount to NAV. In 2011, it traded at a premium/discount greater than 100 basis points more than 10% of the time. If you look at Q3 2011, you'll see the market price dropped less than the NAV and it entered Q4 2011 trading at quite a premium. I am not sure if it actually trades at a premium/discount to its NAV. The price listed is usually very stale, and a dealer maintains a fresh bid-ask spread. So for example at 2 PM the price may be listed at google finance as 64.20, with a most recent trade at 10AM. Suppose the market dropped between 10AM and 2PM. The bid-ask spread that you can trade at may be 63.90, while the listed price is still 64.20. This would give the illusion that the ...
- Tue Oct 02, 2012 3:23 pm
- Forum: Investing - Theory, News & General
- Topic: Shifts in VG Tracking Indexes Announced
- Replies: 155
- Views: 24802
Re: Shifts in VG Tracking Indexes Announced
I noticed that vanguard SCV and Emerging Market Fund are going to change indexes too.
Any idea how this is going to effect the smallness and value of the SCV, and the Smallness of the Emerging Market Fund?
Any idea how this is going to effect the smallness and value of the SCV, and the Smallness of the Emerging Market Fund?
- Tue Aug 28, 2012 11:15 am
- Forum: Investing - Theory, News & General
- Topic: the liquidity premium
- Replies: 43
- Views: 6398
Re: the liquidity premium
If you assume you are going to pay a nasty bid-ask spread this can just be thought of as part of the transaction cost and in my opinion not necessarily a risk. We are talking about stocks, not exotic securities where there may not be a buyer. there are probably 5000 OTC stocks out there that typically don't even trade a single share on any given day. Sure there are bids and asks for all of them, but the spreads might be 10-20% wide, and that's only for the first few hundred shares. Trying selling more than that at once and you might move the stock another 10-20%. The risk here is twofold - first, that you might decide to sell sooner than you planned, requiring you to pay the large spread before you held long enough to make a good return in...
- Mon Aug 27, 2012 11:35 pm
- Forum: Investing - Theory, News & General
- Topic: the liquidity premium
- Replies: 43
- Views: 6398
Re: the liquidity premium
A good example of liquidity risk was the financial crisis in 2008 when just about everything that wasn't highly liquid (and highly safe) was selling at a discount, for example TIPS compared to similar nominal treasuries. Those are hardly exotic securities. Again that is one type of liquidity, more of a liquidity beta as it has to do with he covariance between the asset and the market. Note Larry's per the original article The outperformance of the mutual funds that held less liquid stocks was primarily due to superior performance in down markets, especially market crashes. Per: think it's unfortunate that these academic looking articles so often turn out to be supporting or marketing materials for a product its author is selling, in this c...
- Mon Aug 27, 2012 8:16 pm
- Forum: Investing - Theory, News & General
- Topic: the liquidity premium
- Replies: 43
- Views: 6398
Re: the liquidity premium
The risk is that you want to sell immediately and you can't get full price. If you have a safe liquid asset, you can do that. That is one type of liquidity risk. If you assume you are going to pay a nasty bid-ask spread this can just be thought of as part of the transaction cost and in my opinion not necessarily a risk. We are talking about stocks, not exotic securities where there may not be a buyer. Some stocks are less liquid because of smaller floats and fewer trades. Did you have something else in mind? Information asymmetry makes it less profitable to be a market maker in a stock because you can get burned much more easily. You are taking informational risk with these stocks, i.e., less of information set on them is public, low insti...
- Mon Aug 27, 2012 7:45 pm
- Forum: Investing - Theory, News & General
- Topic: the liquidity premium
- Replies: 43
- Views: 6398
Re: the liquidity premium
I can't speak to the paper, however there are many different measures of liquidity. From bid-ask spread (which is what classic paper amihud mendelson (1985) use) to more sophisticated measures that are more like a Liquidity Beta which measures how the liquidity of the firm changes relative to market wide liquidity. Anyway, it does not necessarily have to be a risk story. Instead it could be a clientele effect similar to muni vs taxable bonds. Think if you have 2 traders, and 2 stocks. Trader A: 1 Year Horizon Trader B: 5 Year Horizon Stock X: Small Bid-Ask Spread Stock Y: Large Bid-Ask Spread The short term trader will avoid the large bid-ask spread stock, not because is riskier, but because he will be paying higher transaction costs on it....
- Mon Aug 27, 2012 5:37 pm
- Forum: Investing - Theory, News & General
- Topic: the liquidity premium
- Replies: 43
- Views: 6398
Re: the liquidity premium
I always thought very rational for a fund company to offer funds that take advantage of the liquidity premium, especially in 401Ks where the money is locked up anyway until retirement. To implement appropriately you would need a closed end fund structure to avoid redeeming issues.
I feel like of all the non-beta risk factors (value, small, momentum, liquidity), liquidity is the most intuitive. I suppose an issue is that there are a lot of different types of it, each requiring its own measure.
I feel like of all the non-beta risk factors (value, small, momentum, liquidity), liquidity is the most intuitive. I suppose an issue is that there are a lot of different types of it, each requiring its own measure.
- Mon Aug 13, 2012 11:04 pm
- Forum: Investing - Theory, News & General
- Topic: a look at different passive strategies
- Replies: 41
- Views: 5023
Re: a look at different passive strategies
To my knowledge Bridgeway Omni Small Cap Value fund (BOSVX), which is NOT available to retail investors.
- Mon Aug 13, 2012 10:00 pm
- Forum: Investing - Theory, News & General
- Topic: a look at different passive strategies
- Replies: 41
- Views: 5023
Re: a look at different passive strategies
Fair point about post for general public.
Per MOM Loads:
VIOV MOM = -0.017
VBR MOM = -0.081
DFSVX MOM = -0.030
So not so much different, although I do agree I would expect DFSVX to be more momentum neutral do to the scientific nature of their screens.
Unrelated have you seen this paper: http://subra.x10hosting.com/tcs15.pdf
Makes a good case for momentum and other anomalies being no more.
Per MOM Loads:
VIOV MOM = -0.017
VBR MOM = -0.081
DFSVX MOM = -0.030
So not so much different, although I do agree I would expect DFSVX to be more momentum neutral do to the scientific nature of their screens.
Unrelated have you seen this paper: http://subra.x10hosting.com/tcs15.pdf
Makes a good case for momentum and other anomalies being no more.
- Mon Aug 13, 2012 9:19 pm
- Forum: Investing - Theory, News & General
- Topic: a look at different passive strategies
- Replies: 41
- Views: 5023
Re: a look at different passive strategies
And if you use the Admiral Shares instead of the Investor shares for Vanguard the gap would be even wider...Note if you subtracted securities lending revenue the expense gap would be narrower
I am surprise you didn't structure your analysis as an (Factor Exposure/Expense Ratio). If you goal is to limit fees of portfolio while achieving a certain factor exposure wouldn't that be the relevant question.
- Mon Aug 13, 2012 5:09 pm
- Forum: Investing - Theory, News & General
- Topic: boglehead theory question
- Replies: 40
- Views: 4710
Re: boglehead theory question
Per the OP if we are talking straight theory this falls within the Grossman-Stiglitz hypothesis: You would be in a situation where the cost of acquiring information is less than the benefit, and one of the people who where a boglehead would become an active trader and make lots of money. Grossman Stiglitz (1980): If the gain of acquiring information is greater than the cost of acquiring information people will search for new information. If the gain of acquiring information is less than the cost of acquiring information people will not search for new information. In equilibrium the cost of acquiring an additional unit of information = the gain from acquring an additional unit of information. Ref: Sanford J. Grossman and Joseph Stiglitz (198...
- Sat Apr 07, 2012 12:27 pm
- Forum: Investing - Theory, News & General
- Topic: Your Business as 'a Stock' - How to Evaluate Equity Profile?
- Replies: 12
- Views: 998
Re: Your Business as 'a Stock' - How to Evaluate Equity Prof
pauliec84 wrote: Just because the risk is difficult to pinpoint quantitatively does not mean that it should be ignored. This is a great quote, I think - am I right about what I inserted (in red) being what you meant? Yes thats what I meant. pauliec84 wrote: All that the portfolio being undeversified means is idiosyncratic risk which is usually diversified away will play a roll in the oval variance of your wealth. This is a bad thing as idiosyncratic risk has no corresponding return. So Idea is just how do you reduce your idiosyncratic risk as much as possible. If you owned a gold mining company this wouldn't be so hard, you could hedge away your idiosyncratic risk through gold derivatives. However, you are having hard time pinpointing your...
- Fri Apr 06, 2012 11:40 pm
- Forum: Investing - Theory, News & General
- Topic: Your Business as 'a Stock' - How to Evaluate Equity Profile?
- Replies: 12
- Views: 998
Re: Your Business as 'a Stock' - How to Evaluate Equity Prof
That would lead to the conclusion that you can't think of this business as ownership of an asset in a portfolio in the way we think of portfolios here, with some risk, some return, some location within an asset class universe and so on. I don't agree with this. Any asset, real or financial should be thought of using the same risk/reward framework. This is true if your deciding to open a lemonade stand, buying a house, or owning a business. In finance 101, you learn that the risk premium assigned to stocks is derived in the same fashion as the risk premium you assign to individual projects. Just because the risk to pinpoint quantitatively does not mean that it should be ignored. All that the portfolio being undeversified means is idiosyncra...
- Fri Apr 06, 2012 7:56 pm
- Forum: Investing - Theory, News & General
- Topic: Your Business as 'a Stock' - How to Evaluate Equity Profile?
- Replies: 12
- Views: 998
Re: Your Business as 'a Stock' - How to Evaluate Equity Prof
Do you have any competitors that are public companies? Any Micro-cap stocks that are in the same space? I think that trying to find a public comparable would be your best bet, but seems like that would be unrealistic.
- Fri Feb 24, 2012 8:33 am
- Forum: Investing - Theory, News & General
- Topic: New Domestic Small Cap Value Option PXSV
- Replies: 63
- Views: 9526
Re: New Domestic Small Cap Value Option PXSV
grap0013, it is a real pain in the neck to convert monthly to early in excel, no easy way to do it to my knowledge.
- Thu Feb 23, 2012 2:04 pm
- Forum: Investing - Theory, News & General
- Topic: New Domestic Small Cap Value Option PXSV
- Replies: 63
- Views: 9526
Re: New Domestic Small Cap Value Option PXSV
Thanks for Link
The RAFI SV
MKTRF: 0.994
SMB: 0.862
HML 0.669
UMD (Momentum): -0.179
After accounting for the ER and Turnover I have an expected real retrun of 8.2%.
Not Bad but...
That is the same as VBR and less than VIOV/IJS. So you are taking more risk on in the factor loadings for the same expected return. Not worth it in my opinion.
The RAFI SV does have a positive alpha of 0.002 (monthly) over the time period. However I never expect alphas to persist, especially in backward looking indexes, as
a) There is no drag of the transaction costs & ER
b) The index was probably constructed with getting the maxmium alpha in mind.
The RAFI SV
MKTRF: 0.994
SMB: 0.862
HML 0.669
UMD (Momentum): -0.179
After accounting for the ER and Turnover I have an expected real retrun of 8.2%.
Not Bad but...
That is the same as VBR and less than VIOV/IJS. So you are taking more risk on in the factor loadings for the same expected return. Not worth it in my opinion.
The RAFI SV does have a positive alpha of 0.002 (monthly) over the time period. However I never expect alphas to persist, especially in backward looking indexes, as
a) There is no drag of the transaction costs & ER
b) The index was probably constructed with getting the maxmium alpha in mind.
- Thu Feb 23, 2012 1:43 pm
- Forum: Investing - Theory, News & General
- Topic: New Domestic Small Cap Value Option PXSV
- Replies: 63
- Views: 9526
Re: New Domestic Small Cap Value Option PXSV
If you can get your hands on them (need month over month), I would be happy to run some fama french regressions on them to figure out the factor loads.
- Thu Feb 23, 2012 10:09 am
- Forum: Investing - Theory, News & General
- Topic: New Domestic Small Cap Value Option PXSV
- Replies: 63
- Views: 9526
Re: New Domestic Small Cap Value Option PXSV
Typo. Should be 0.897I ran a Fama French Factor Loading Analysis on PXSV aawhile back.
Beta = 0.0897
Am I missing something?
- Wed Feb 22, 2012 11:46 pm
- Forum: Investing - Theory, News & General
- Topic: Foreign equity allocation
- Replies: 102
- Views: 6610
Re: Foreign equity allocation
After all, you don't weight your stock/bond ratio on the size of the two markets do you? What do you think the age in bonds rule is? It is essentially mechanism to keep your risk exposures in line with the market capitalization's. Lets say we have 3 Assets, Stocks, Bonds, Labor Capital. Labor Capital (for most people) is more Bond Like. Back of the Envelope lets say Stocks = 25% of world wealth, Bonds = 25% of world wealth, Labor Capital = 50% of world wealth. When we are young we have close to 100% of our wealth tied into Labor Capital, and thus try to offset this by over-weighting stocks and under-weighting bonds. When we are old we have close to 0% of our wealth tied into Labor Capital, and thus we try to offset this by under-weighting ...
- Wed Feb 22, 2012 10:56 pm
- Forum: Investing - Theory, News & General
- Topic: New Domestic Small Cap Value Option PXSV
- Replies: 63
- Views: 9526
Re: New Domestic Small Cap Value Option PXSV
I crunched these numbers while ago. I think it was from the fund not the index. It may not be the best. If you know where the index returns are available I am happy (and curious) to run those through. Always on the look out for new funds, now only if there was an international small cap value fund!Your number crunching is appreciated! Did you run the numbers on the index or the fund itself? What time frame? PXSV has only been around for about 6 months. Prior to 06/16/11 it was a much different fund. That HML does not jive with the link I posted and that turnover is likely from the old fund? I think we may have to wait for the new data before we can draw conclusions? Can you run the numbers from June 2011 thru Jan. 2012?
- Wed Feb 22, 2012 9:04 pm
- Forum: Investing - Theory, News & General
- Topic: New Domestic Small Cap Value Option PXSV
- Replies: 63
- Views: 9526
Re: New Domestic Small Cap Value Option PXSV
I ran a Fama French Factor Loading Analysis on PXSV aawhile back.
I got the following results.
ER: 0.39
Turnover: 0.90
Alpha: -0.004 (monthly)
Beta = 0.0897
SMB = 0.708
HML = 0.182
Momemtum (UMD) = -0.044
Projected Expected Real Return (assuming alpha = ER - Turnover) = 6.2%
My feeling was the turnover was too high, the Value Loading too low, and the low alpha was a bit of a red flag too.
VIOV/IJS has SMB = 0.608, HML = 0.605
VBR has SMB = 0.424, HML = 0.673
Both have better ER & Turnover too. I think those are optimal over PXSV.
I got the following results.
ER: 0.39
Turnover: 0.90
Alpha: -0.004 (monthly)
Beta = 0.0897
SMB = 0.708
HML = 0.182
Momemtum (UMD) = -0.044
Projected Expected Real Return (assuming alpha = ER - Turnover) = 6.2%
My feeling was the turnover was too high, the Value Loading too low, and the low alpha was a bit of a red flag too.
VIOV/IJS has SMB = 0.608, HML = 0.605
VBR has SMB = 0.424, HML = 0.673
Both have better ER & Turnover too. I think those are optimal over PXSV.
- Thu Feb 16, 2012 6:46 pm
- Forum: Investing - Theory, News & General
- Topic: A Hedge Fund like Mutual Fund Larry Swedroe likes
- Replies: 37
- Views: 4607
Re: A Hedge Fund like Mutual Fund Larry Swedroe likes
Something to keep in mind is that you don't have to get to a 1 loading. Robert T uses a 0.2 Loading on Small and a 0.4 Loading on Value. Those are doable, but it does mean putting a huge % of assets in small and/or value funds.
- Thu Feb 16, 2012 5:25 pm
- Forum: Investing - Theory, News & General
- Topic: A Hedge Fund like Mutual Fund Larry Swedroe likes
- Replies: 37
- Views: 4607
Re: A Hedge Fund like Mutual Fund Larry Swedroe likes
great to hear. It is a very very very useful tool.
If you ever need any help with incorporating the resultings into your investing decisions PM me.
If you ever need any help with incorporating the resultings into your investing decisions PM me.
- Thu Feb 09, 2012 7:35 pm
- Forum: Investing - Theory, News & General
- Topic: Post your asset allocation here:
- Replies: 136
- Views: 16651
Re: Post your asset allocation here:
Labor Income to Stock Ratio: 95%/5%.
Stock Holdings:
35% International Small Cap (VSS)
5% Total International (VXUS)
5% International Value (DFA)
5% Emerging Value (DFA)
5% Emerging (VWO)
20% Domestic Small Value (VBR/VIOV)
10% Domestic Mid-Cap Value (VOE)
5% Total Domestic (VTI)
5% REIT (VNQ/VNQI)
5% Microcap (Bridgway)
Bond Like Holdings:
Labor Income (assuming 2% growth rate and 5% discount rate)
Stock Holdings:
35% International Small Cap (VSS)
5% Total International (VXUS)
5% International Value (DFA)
5% Emerging Value (DFA)
5% Emerging (VWO)
20% Domestic Small Value (VBR/VIOV)
10% Domestic Mid-Cap Value (VOE)
5% Total Domestic (VTI)
5% REIT (VNQ/VNQI)
5% Microcap (Bridgway)
Bond Like Holdings:
Labor Income (assuming 2% growth rate and 5% discount rate)
- Sat Jan 28, 2012 3:17 pm
- Forum: Investing - Theory, News & General
- Topic: A Hedge Fund like Mutual Fund Larry Swedroe likes
- Replies: 37
- Views: 4607
Re: A Hedge Fund like Mutual Fund Larry Swedroe likes
Happy to share it.
1. Step 1: Convert Prices into Returns.
2. Step 2: Download Fama-French Factors from Ken Frenches Website (http://mba.tuck.dartmouth.edu/pages/fac ... brary.html)
3. Step 3: Subtract Risk Free rate from the Returns
4. Step 4: Run Regression using Excel Data analysis
y = fund returns - risk free rate
x = the different fama french factors.
William Bernstein has a decent write up how to do it. http://www.efficientfrontier.com/ef/101/roll101.htm
If you need help feel free to PM me
1. Step 1: Convert Prices into Returns.
2. Step 2: Download Fama-French Factors from Ken Frenches Website (http://mba.tuck.dartmouth.edu/pages/fac ... brary.html)
3. Step 3: Subtract Risk Free rate from the Returns
4. Step 4: Run Regression using Excel Data analysis
y = fund returns - risk free rate
x = the different fama french factors.
William Bernstein has a decent write up how to do it. http://www.efficientfrontier.com/ef/101/roll101.htm
If you need help feel free to PM me
- Sat Jan 28, 2012 12:33 am
- Forum: Investing - Theory, News & General
- Topic: A Hedge Fund like Mutual Fund Larry Swedroe likes
- Replies: 37
- Views: 4607
Re: A Hedge Fund like Mutual Fund Larry Swedroe likes
Thanks. I was getting ready to rip into the fund, but the results actually come out pretty darn well (granted only over 23months). Below are the results With the momentum factor historically being ~7% a year, the momentum exposure of the large cap fund gives you ~2.5%+ per year, while the exposure from the small cap fund gives you 1.6%. Given the trading costs of the two (per larry's comments), the small cap fund gives all of its momentum benefits back. So its probably best to be avoided. However the large cap fund probably keeps ~half of its momentum return. There is a serious case to be made for a 2 Fund portfolio domestically. SCV + AQR LC Momentum. So these are only available via adviser? Hopefully these great funds will pave the way fo...
- Fri Jan 27, 2012 8:03 pm
- Forum: Investing - Theory, News & General
- Topic: A Hedge Fund like Mutual Fund Larry Swedroe likes
- Replies: 37
- Views: 4607
Re: A Hedge Fund like Mutual Fund Larry Swedroe likes
Clearly_Irrational: Do you have the return data in spreadsheet form? If so i could run it through the FF regression and answer a lot of our questions.
- Fri Jan 27, 2012 6:41 pm
- Forum: Investing - Theory, News & General
- Topic: A Hedge Fund like Mutual Fund Larry Swedroe likes
- Replies: 37
- Views: 4607
Re: A Hedge Fund like Mutual Fund Larry Swedroe likes
Can you share the loadings and/or trading costs data?
Yahoo finance has turnover of AMOMX at 180% implying 1.8% annual drag from trading costs using the 1 to 100 rule.
For the small cap momentum fund (ASMOX) the turnover is 380%.
Yahoo finance has turnover of AMOMX at 180% implying 1.8% annual drag from trading costs using the 1 to 100 rule.
For the small cap momentum fund (ASMOX) the turnover is 380%.
- Fri Jan 27, 2012 6:21 pm
- Forum: Investing - Theory, News & General
- Topic: A Hedge Fund like Mutual Fund Larry Swedroe likes
- Replies: 37
- Views: 4607
Re: A Hedge Fund like Mutual Fund Larry Swedroe likes
I'm not arguing it doesn't exist, in fact I think there is reasonable evidence that the market exhibits short term serial correlation (momentum) and long term anti-correlation (reversion to mean). I do think those effects are likely to persist due to basic human behavior. I'm just not sure I see any way to capture them in a passive way. it would be interesting to see actually returns of the AQR funds. to answer the following questions. -How much exposure do they actually get to the momentum factor -At what cost does this exposure come (IE negitive exposure to value factor, trading costs etc as seen in negitve alpha etc). Larry per your comment: I have spoken to many academics on the momentum question and no one has any risk story. They all...
- Fri Jan 27, 2012 3:25 pm
- Forum: Investing - Theory, News & General
- Topic: A Hedge Fund like Mutual Fund Larry Swedroe likes
- Replies: 37
- Views: 4607
Re: A Hedge Fund like Mutual Fund Larry Swedroe likes
Just brief note that momentum premium has existed for very long time, well after it was "discovered" and it exists virtually everywhere around the globe and it exists across the spectrum of investments from stocks, to bonds to currencies to commodities. And even the pretty smart guys at DFA have incorporated it into their screens, as have others like Bridgeway as well. It is purely a behavioral issue. But it has existed for very long time as I said, well after lots of money has chased it. Will it continue, perhaps not. Larry Agree with everything except "Its purely a behavioral issue." I think what saying something like that really means is "we just don't know." Per Sadka 2003 (which is taught in Bodie Kane Ma...
- Thu Jan 26, 2012 11:18 pm
- Forum: Investing - Theory, News & General
- Topic: Historic BuyBack & Dividend Information
- Replies: 0
- Views: 207
Historic BuyBack & Dividend Information
The resent post on real return (and the old Allan Roth Article http://www.cbsnews.com/8301-505123_162-37744031/stocks-produce-526-percent-cash-yield/) inspired me to run the historic data see what the dividend yield and stock buy backs have ACTUALLY been. Think the takeaway is that if we estimate real return estimates based upon the money companies return to shareholders, estimates should be high as companies have been returning lots of cash to shareholders. *Data is from Compustat (Net buybacks) & CRSP (Dividends and Prices). Average (Buybacks, Dividends, Total) Total: -0.3%, 3.2%, 2.9% 2000-2010: 1.2%, 2.3%, 3.5% 1990-1999: -0.6%, 2.8%, 2.2% 1980-1989: -0.9%, 4.2%, 3.3% 1971-1979: -1.3%, 3.6% 2.3% year netbuyback netdividend total 201...
- Thu Jan 26, 2012 9:51 pm
- Forum: Investing - Theory, News & General
- Topic: Real Return Poll
- Replies: 66
- Views: 5377
Re: Real Return Poll
Why not include the stock buybacks with the dividend yield? http://www.cbsnews.com/8301-505123_162- ... ash-yield/
- Wed Jan 25, 2012 2:54 pm
- Forum: Investing - Theory, News & General
- Topic: Regressions continue to show RPV/RZV are good DFA surrogates
- Replies: 29
- Views: 7791
Re: Regressions continue to show RPV/RZV are good DFA surrog
Slight Tangent Question:
Where is data on the underlying index available to the public?
Where is data on the underlying index available to the public?
- Tue Jan 24, 2012 8:17 pm
- Forum: Investing - Theory, News & General
- Topic: Regressions continue to show RPV/RZV are good DFA surrogates
- Replies: 29
- Views: 7791
Re: Regressions continue to show RPV/RZV are good DFA surrog
Eric. Thanks for running the data with the 4 factor.
My take away is not the value added or not added by the momentum, my takeaway is that the negative momentum on the Rydex funds wipe out all of the expected return gain from the higher factor loading.
Tilting to small and value as many of us do, it is impossible to create a portfolio with high positive momentum. I do pick my funds to minimize negative momentum though.
Thanks for running it though. Very helpful.
My take away is not the value added or not added by the momentum, my takeaway is that the negative momentum on the Rydex funds wipe out all of the expected return gain from the higher factor loading.
Tilting to small and value as many of us do, it is impossible to create a portfolio with high positive momentum. I do pick my funds to minimize negative momentum though.
Thanks for running it though. Very helpful.
- Tue Jan 24, 2012 11:03 am
- Forum: Investing - Theory, News & General
- Topic: Regressions continue to show RPV/RZV are good DFA surrogates
- Replies: 29
- Views: 7791
Re: Regressions continue to show RPV/RZV are good DFA surrog
I'm not smart enough to know why the Pure Value alphas appear to be so negative. BUT, I do note that those apparent negative alphas aren't statistically significant (at the moment, anyway). Thus, there is a very non-zero possibility that the true alpha has been zero, or even positive. It isn't a useful thing to have a debate about a result which has a p-value of 30% to 40% -- it is just kind of foolish. For the uninformed, "p-value" is essentially the likelihood, given certain assumptions, that the apparent outperformance (or underperformance) was the result of good luck (or bad luck), instead of some systematic factor. The traditional threshold for a confident conclusion is a p-value of less than 0.05, which basically means a le...
- Tue Jan 24, 2012 10:31 am
- Forum: Investing - Theory, News & General
- Topic: Regressions continue to show RPV/RZV are good DFA surrogates
- Replies: 29
- Views: 7791
Re: Regressions continue to show RPV/RZV are good DFA surrog
Why not post the alpha in your comparison? Also do the DFA funds give you as much negative expsoure to the momentum premium as RPV & RZV? I am unable to run the regressions on the DFLVX data at the moment, but am betting they have much better momentum exposures. So not good substitutes. Furthermore if you just run a 3 factor regression and don't include the momentum, the alphas would become a lot more negative for the Rydex Funds. RPV Alpha: -0.0013 MKTRF: 0.961 SMB: 0.286 HML: 0.698 UMD: -0.433 E(r) - rf = 4.44% 0 Alpha Return - rF = 5.5% RZV Alpha: -0.0019 MKTRF: 0.917 SMB: 1.41 HML: 0.977 UMD: -0.542 E(r) - rf = 6.67% 0 Alpha Return - rF= 8.2% Edit* I had the DSFVX data alraedy saved on my computer... DFSVX Alpha: -0.0025 MKTRF: 0.97...