Search found 112 matches
- Tue Aug 26, 2014 3:41 am
- Forum: Investing - Theory, News & General
- Topic: The Larry Portfolio - For Tilters and S&D'ers Only
- Replies: 27
- Views: 5277
Re: The Larry Portfolio - For Tilters and S&D'ers Only
Clive, what about the migration problem, i.e. that only a small part of SV stocks is responsible for the aggregate return?
- Mon Aug 25, 2014 1:17 pm
- Forum: Investing - Theory, News & General
- Topic: Should I use margin to buy a balanced fund?
- Replies: 944
- Views: 299307
Re: Should I use margin to buy a balanced fund?
After digging through the PDF I think they are using bills, Gov LT bonds and equities. This is because they mention the DMS data set and bonds there are Gov LT, AFAIK. They create RP portfolios (equal volatility contribution) based on the prior 30 year data and rebalance once a year. Then lever up in hindsight to match the risk of 60/40. DMS data starts in 1900, this explains 1930 as first year of the actual backtest. In their test it's not bad, but not really better either. Basically you just exchange equity risk and duration risk. And this means the relative result to 60/40 depends mostly on (future) inflation/interest rate behaviour (see page 27). Don't know what happens when you add corporate bonds and use medium duration (i.e. TBM or a...
- Mon Aug 25, 2014 12:38 pm
- Forum: Investing - Theory, News & General
- Topic: Should I use margin to buy a balanced fund?
- Replies: 944
- Views: 299307
Re: Should I use margin to buy a balanced fund?
Maybe of interest here? In a DFA PDF they compare levered Risk Parity portfolios with regular 60/40 portfolios around the world. 1930-2010, using the local T-Bill rate. While RP is not a fixed AA but changes somewhat, it usually ends around 30/70 or so, on average. http://www.texpers.org/documents/confer ... 201202.pdf (page 26).
- Mon Aug 25, 2014 11:25 am
- Forum: Investing - Theory, News & General
- Topic: Why don't utilities get any praise
- Replies: 39
- Views: 5781
Re: Why don't utilities get any praise
Just to add to the discussion re: tilts and such: In utilities you see a huge duration component when doing a regression. Sharpe always brings this up when he talks about his "return based style analysis" method. There are some older papers and interviews on his website for free. I also remember Robert T, when analyzing the whole profitability thingy, he found that consumer staples(?), HC and utilities historically had some exposure, I think? Am not sure.
Some sectors are basically factor tilts, at least until now (I don't know about the future).
Some sectors are basically factor tilts, at least until now (I don't know about the future).
- Sun Aug 24, 2014 12:54 pm
- Forum: Investing - Theory, News & General
- Topic: International allocation
- Replies: 81
- Views: 9177
Re: International allocation
You are not wrong. It's as much a shacky ground to style tilt as it is to tilt geographically. It's all just based on backtesting of superior returns of specific portfolios in the 20th century. small-value here, U.S. market there. May turn out right or not.Austintatious wrote:Where am I wrong, here?
- Sat Aug 23, 2014 6:33 pm
- Forum: Investing - Theory, News & General
- Topic: Interesting Asness riff on Fundamental Indexing
- Replies: 6
- Views: 2321
Re: Interesting Asness riff on Fundamental Indexing
Na, don't think so, countmein. Remember Asness' 10 Pet Peeves some months or 1-2 years ago? In one of them he made it very clear that you cannot deviate from the market portfolio by a non-trivial amount and still praise yourself as "passive" investor. And then loudly diss the "active" folk. Doesn't matter if it's profitable, if you think to take more risk, or others make mistakes. Doesn't matter if you claim "scientific investing" or "risk parity" or "rational investing" - you are an active investor making bets. Asness himself too, of course. He seems to really demand this kind of intellectual honesty. Be it market cap <> non market cap or FI <> Value.
- Wed Aug 20, 2014 5:56 am
- Forum: Investing - Theory, News & General
- Topic: Dow Jones Index Fund?
- Replies: 42
- Views: 12950
Re: Dow Jones Index Fund?
If you believe the Dow "gains more than the S&P 500," there could be two reasons. Either a) there's something kewl about the Dow companies, or b) something magical about the crazy way the Dow Jones Industrial Average is calculated, or c) it's just because the Dow contains, on the average, much bigger companies than the S&P 500. This is true. However, it's not just size/megacap but also a bit of value and quality. At least since 1998 (start Yahoo) and at least with the data from the pv website. Basically during this time period, DIA = GMO/Grantham's Mini-Me. But I would not count on that, because it's just a side effect of the construction method. Another question not yet answered is: will this Megacap/Value/Quality combo ...
- Sun Aug 17, 2014 3:06 pm
- Forum: Investing - Theory, News & General
- Topic: Should I use margin to buy a balanced fund?
- Replies: 944
- Views: 299307
Re: Should I use margin to buy a balanced fund?
I am not sure why this thread is drifting into a flawed attack on Fama/French. You (Rob, lee) are aware that the market portfolio can be/is meant to be efficient in both CAPM world and multifactor world? and that leveraging this market protfolio is also a good idea in multifactor world as it is in CAPM world? see Cochrane's 1999 PDF, figure 2, for example: http://faculty.chicagobooth.edu/john.cochrane/research/papers/ep3Q99_4.pdf It's just that we are not talking about a limited view of mean-variance efficiency with one single driver of risk and returns, but multifactor efficiency. i.e. taking into acount different risks and investment goals people care for. Which is totally accepted in the bond market with factors like term/duration risk, ...
- Wed Aug 13, 2014 12:21 pm
- Forum: Personal Investments
- Topic: Meb Faber's New Global Tactical ETF "GTAA"
- Replies: 20
- Views: 6343
Re: Meb Faber's New Global Tactical ETF "GTAA"
Some weeks ago the fund management has changed: AdvisorShares, a leading sponsor of actively managed exchange-traded funds (ETFs), announced that Chapel Hill, North Carolina-based Morgan Creek Capital Management will assume sub-advisor responsibilities of AdvisorShares Morgan Creek Global Tactical ETF (NYSE Arca: GTAA) today, July 28, 2014 from http://www.prnewswire.com/news-releases/advisorshares-announces-morgan-creek-capital-management-begins-as-portfolio-manager-of-global-tactical-etf-gtaa-268870321.html The former name of the ETF was "AdvisorShares Cambria Global Tactical ETF". It may be useful to document Mebane Faber's GTAA ETF for future reference - because I don't think Faber will ever take responsibility and present the ...
- Wed Aug 13, 2014 6:05 am
- Forum: Investing - Theory, News & General
- Topic: Left Tail Smackdown*: Larry vs. Permanent Portfolio
- Replies: 15
- Views: 3173
Re: Left Tail Smackdown*: Larry vs. Permanent Portfolio
Regarding naming: "low beta, high tilt" is not the best description either. that's because it mixes CAPM world lingo (beta factor = market factor**) with multifactor world lingo (tilt). In fact "high tilt" means high beta on those additional factors! "low beta" may also be confused with an AA to low (market) beta stocks. but it's about a lower stock/higher safe bond AA, not a Low Beta/Volatility fund.
** even in CAPM world it is only true if you use just the (U.S.) stock market as market portfolio, not all assets. this is often done, but flawed ("Roll's critique").
** even in CAPM world it is only true if you use just the (U.S.) stock market as market portfolio, not all assets. this is often done, but flawed ("Roll's critique").
- Mon Aug 11, 2014 4:54 pm
- Forum: Investing - Theory, News & General
- Topic: Does domestic over weighting qualify as active management?
- Replies: 26
- Views: 2105
Re: Does domestic over weighting qualify as active managemen
there is a 1992(?) paper by William Sharpe that has a simple formula: market = sum of all money invested market return = return of mcap portfolios (minus costs) + return of non-mcap portfolios (minus costs) Sharpe calls the mcaps part of the formula "passive" and the non-mcap part "active", because for every dollar deviating from the market (and thus) mcap portfolios, there MUST be another dollar doing exactly the opposite. which is the key difference between the two groups. and which is exactly the same discussion you get when SV tilts are discussed here, by the way ("who is on the other side of the trade?"). you cannot overweight the US and then go around praising yourself while scolding the "tilters&quo...
- Mon Aug 11, 2014 7:14 am
- Forum: Investing - Theory, News & General
- Topic: Endowments: Paying for complexity or performance?
- Replies: 14
- Views: 1538
Re: Endowments: Paying for complexity or performance?
You may like the study Rick mentioned in one of his blog articles last year: http://www.rickferri.com/blog/strategy/ ... ent-skill/
Link to the study: http://papers.ssrn.com/sol3/papers.cfm? ... id=1972317
the results are mostly summarized in tables 5, 6 and 7. basically the top endowments had one advantage: access to the top hedge funds to replicate this asset class. aside from this likely HF alpha (at least pre-2005 or so), the researchers did not find significiant alpha, not even for the Ivy League schools: not for Private Equity as an asset class (just stale prices/lagged smallcap beta exposure). And not regarding the endowments' timing, picking or manager selection skills.
Link to the study: http://papers.ssrn.com/sol3/papers.cfm? ... id=1972317
the results are mostly summarized in tables 5, 6 and 7. basically the top endowments had one advantage: access to the top hedge funds to replicate this asset class. aside from this likely HF alpha (at least pre-2005 or so), the researchers did not find significiant alpha, not even for the Ivy League schools: not for Private Equity as an asset class (just stale prices/lagged smallcap beta exposure). And not regarding the endowments' timing, picking or manager selection skills.