Search found 112 matches

by jaab
Sat Sep 20, 2014 5:59 pm
Forum: Investing - Theory, News & General
Topic: Why are DFA Core and Vector funds so light on value exposure
Replies: 3
Views: 926

Re: Why are DFA Core and Vector funds so light on value expo

Here is an "advisor only" vector fact sheet from last year. has a bit more details about portfolio composition than we see in the pubic downloads at DFA's website: http://www.slideshare.net/sweydert1/dfa ... 302013-pdf

But I also remember reading about HML methodology vs. recent relative midcap ( or was it blend/neutral stocks?) outperformance, showing lower exposures for several value funds, or something?
by jaab
Sat Sep 20, 2014 3:45 pm
Forum: Investing - Theory, News & General
Topic: What evidence would prove the Boglehead mentality wrong?
Replies: 212
Views: 27663

Re: What evidence would prove the Boglehead mentality wrong?

neurosphere wrote:I haven't read the whole thread, so forgive me if this has been answered. But can you show me which mechanical system has been shown to outperform the market?
HmL :mrgreen:
by jaab
Fri Sep 19, 2014 5:52 pm
Forum: Investing - Theory, News & General
Topic: Premiums: Size, Value, Beta, Momentum
Replies: 40
Views: 4931

Re: Premiums: Size, Value, Beta, Momentum

golfvestor, say, are you on some kind of mission to have "beef" with people? Since reading your comment some weeks ago in Robert's EM 1900-2013 thread everytime I see your name I have to wonder "oh oh, what's up now again?". :confused
by jaab
Fri Sep 19, 2014 9:49 am
Forum: Investing - Theory, News & General
Topic: A look at the large value premium
Replies: 16
Views: 3350

Re: A look at the large value premium

Here is another survey article (written by a free lunch seeking guy though) which also mentions the size dependency of BtM. Don't skip before you get to the green/gray diagram in the middle of the page. I think it's not about a "best" multiple, because value is vague. Just about avoiding to rely solely on BtM it seems, at least for anything above smallcaps: http://greenbackd.com/2012/04/30/which- ... ue-stocks/
Still maybe P/E or or Enterprise Yield or one of the other metrics will be the problematic ratio in the future. Who knows? So I'd agree to just throw in a bunch of metrics, at least 2-3 of them.
by jaab
Thu Sep 18, 2014 6:13 pm
Forum: Investing - Theory, News & General
Topic: Bridgeway Omni SCV (BOTSX) vs PXSV
Replies: 33
Views: 4740

Re: Bridgeway Omni SCV (BOTSX) vs PXSV

berntson wrote:This is one of the reasons I like the RAFI funds.
:sharebeer
by jaab
Thu Sep 18, 2014 1:12 pm
Forum: Investing - Theory, News & General
Topic: Bridgeway Omni SCV (BOTSX) vs PXSV
Replies: 33
Views: 4740

Re: Bridgeway Omni SCV (BOTSX) vs PXSV

sidenote #2 regarding HML that I got reminded of skimming through a paper in another thread: it's not industry adjusted. have a look at table 7 here: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=213872 do you see the difference in volatility and t-stat for an industry-adjusted HML? On page 11 the authors state: Our quality, value, and size factors are formed across all industries, and our sorting variables are likely tobe correlated with industries: for example, utilities are always likely to end up in the value portfolio due to their high book-to-market ratio. Hence, each factor can be decomposed into positions across industries and positions within industries. Cohen and Polk (1995) suggest creating industry-specific breakpoints to e...
by jaab
Thu Sep 18, 2014 7:07 am
Forum: Investing - Theory, News & General
Topic: M*'s Samuel Lee on Dividend ETF and Factor Investing
Replies: 5
Views: 1775

Re: M*'s Samuel Lee on Dividend ETF and Factor Investing

Can anyone corroborate the "doesn't seem to exist in foreign markets" part? I thought there was a Fama paper or two finding that both size and value were persistent abroad. Take at look at tables 4, 6, 7 and especially table 9 (long-only portfolios): http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2179247 The study uses market cap deciles, by the way, as did the "institutionals on the small train" researchers from the Calpers thread. Which is more realistic for a long-only investor using popular value indexes by MSCI or the like (often 50/50 of mcap value/growth). With SMB there seems to be the general problem of SV vs. SG (SG as "dark hole"). But there also seems to be a difference between a long/short por...
by jaab
Wed Sep 17, 2014 7:21 pm
Forum: Investing - Theory, News & General
Topic: Financial Psychology - Mind Over Money
Replies: 78
Views: 7041

Re: Financial Psychology - Mind Over Money

pkcrafter wrote:Postingname wrote:
But I don't remember seeing anything that I could specifically -- off the top of the bat -- apply to investing.

A lot of it applies to investing. Have you seen Behavioral Pitfalls in the Wiki?
The people over on the dark side of investing also have a blog category about it: http://www.alphaarchitect.com/category/ ... l-finance/
by jaab
Wed Sep 17, 2014 5:54 pm
Forum: Investing - Theory, News & General
Topic: CalPERS Eliminates Hedge Fund Program
Replies: 44
Views: 5130

Re: CalPERS Eliminates Hedge Fund Program

Blue wrote:Why does the former pique your concern for distorted prices but not the latter?
Don't know where you get this idea from? Just some days ago I myself wondered about DFA's possible asset bloat problem in another thread. And them apparently pushing the higher sized(?) Targeted Value fund range as a result. Obviously too much money may become a problem for DFA too.
by jaab
Wed Sep 17, 2014 10:51 am
Forum: Investing - Theory, News & General
Topic: Bridgeway Omni SCV (BOTSX) vs PXSV
Replies: 33
Views: 4740

Re: Bridgeway Omni SCV (BOTSX) vs PXSV

As a sidenote: there are other arguments against the F/F factor construction methodology beside the single value metric thing, too. One is about the somewhat old P/B data used in HML's construction, which also interferes with momentum a bit. "The Devil in HML’s Details": http://www.bfjlaward.com/pdf/25907/49-68_Asness_JPM_0716.pdf A summary: http://www.alphaarchitect.com/blog/2012/05/23/calculating-value-portfolios-why-details-matter/ Frazzini provides us with an adjusted "HML devil" version in his data library, even for several countries and regions: http://www.econ.yale.edu/~af227/data_library.htm Another is about the general "feature" of SMB and HML to show negative or positive alpha on regular indexes: &quo...
by jaab
Wed Sep 17, 2014 4:07 am
Forum: Investing - Theory, News & General
Topic: Randomly-weighted stock portfolios beat the index
Replies: 28
Views: 3769

Re: Randomly-weighted stock portfolios beat the index

berntson wrote:It's unclear to me how statistically significant their results are, especially given that they use a short fifteen-year period of US data.
It is worth noting that U.S. EW portfolios showed a surprisingly high 4 factor alpha during the 2000s. In the decades before this did not happen. Our study here looks at the years 1998-2012. see http://www.rallc.com/Production%20conte ... tegies.pdf for example. The table on page 51 with results for different time periods.
by jaab
Wed Sep 17, 2014 2:54 am
Forum: Investing - Theory, News & General
Topic: CalPERS Eliminates Hedge Fund Program
Replies: 44
Views: 5130

Re: CalPERS Eliminates Hedge Fund Program

Actually, institutions have been moving heavily into the 9th and 10th deciles (microcap). Check out the article above. They use equal market cap deciles. Not equal number of stocks deciles. Which is the whole point of their study, see abstract and footnote 1. The lowest 10-20% of market cap are just the regular smallcap space for MSCI, S&P and other index providers. The authors do not claim that institutional investors target the smallest 1-2% (or so) of the market, which is what MSCI calls "microcap" for example. A large institution like Calpers cannot put, say, 10% of their portfolio of ~300 bn into microcaps or even SV without distorting prices. Thus their exposure to really small stocks will not have much of an impact on ...
by jaab
Tue Sep 16, 2014 8:29 pm
Forum: Investing - Theory, News & General
Topic: Bridgeway Omni SCV (BOTSX) vs PXSV
Replies: 33
Views: 4740

Re: Bridgeway Omni SCV (BOTSX) vs PXSV

For DIY analysis you have the problem to get free (or cheap) data at all. :( Both Kenneth French and Andrea Frazzini only provide HML (B/P) returns. One may construct a selfmade factor by using index data from, say, S&P, MSCI or nowadays CRSP (U.S.). returns of value index minus growth index or such, maybe separate calculations for large and small caps. Professional investors with commercial equity models like the one from MSCI Barra can at least utilize P/B, P/E yield and dividend yield, as far as I know. (If you want to use dividends as value metric is another question). Maybe someone with experience in/with such groups can tell us if they do so? In the popular/often discussed studies with factor regressions, HML (P/B) still seems to ...
by jaab
Tue Sep 16, 2014 1:05 pm
Forum: Investing - Theory, News & General
Topic: Let me get this straight about SCV & factor diversification
Replies: 161
Views: 38835

Re: Let me get this straight about SCV & factor diversificat

I am a complete novice on this, and simply copied the R script from a tutorial on http://www.CalculatingInvestor.com (very cool site, which I'm now digging through), and did slight modifications as necessary. I am in a somewhat similar situation, just started some weeks earlier. :D Main reason was that Excel is a pain in the a** for using timeseries and doing more advanced analysis. e.g. I wanted to see a plot of various ratios for rolling investment periods of 25 years each. Or other features the PV site now is able to do, but with slight variations for me. Maybe we should start a new thread about doing the "Robert T stuff" :wink: in R, not Excel? with links and such with helpfull code snippets, ... There are loads of blogs and ...
by jaab
Tue Sep 16, 2014 4:33 am
Forum: Investing - Theory, News & General
Topic: Good article on style premium investing & AQR new fund
Replies: 86
Views: 12779

Re: Good article on style premium investing & AQR new fund

Larry, out of interest: does AQR provide (public or advisor-only) data/reports about what exactly they are doing in the fund and their tracking ability? For stocks we have French's and Frazzini's free data libraries. For CCFs indexes and gold there are sources too. bonds are a bit more problematic if you want more than yearly data from factsheets or returns taken from actual fund returns which may only be availabe for recent years and popular markets. But how do you meassure if such a multi premia+multi asset class fund does what he is supposed to do?
by jaab
Mon Sep 15, 2014 7:09 pm
Forum: Investing - Theory, News & General
Topic: Let me get this straight about SCV & factor diversification
Replies: 161
Views: 38835

Re: Let me get this straight about SCV & factor diversificat

First output looks like R, right? I have not yet much clue about it. Here is what I did to replicate the VIVAX results, but with daily log (ln) returns. PV uses monthly returns I think. Don't know about PV and simple/log. I have learned to transform simple stock returns to log returns for statistical analysis, just in case: more normally distributed then. Comments about this? library(Quandl) library(quantmod) ff <- Quandl("KFRENCH/FACTORS_D", type="xts") / 100 getSymbols("VISVX", from="1970-01-01") fund <- diff(log(Ad(VISVX)))[-1] ff <- log(ff + 1) fund <- fund - ff[,4] # column 4 is RF returns <- na.omit(cbind(fund,ff[,-4]))["2001-07::2014-07"] summary(lm(returns[,1] ~ returns[,-1])) Did I ...
by jaab
Mon Sep 15, 2014 1:05 pm
Forum: Investing - Theory, News & General
Topic: Due diligence on RAFI Pure Small Value
Replies: 189
Views: 28678

Re: Due diligence on RAFI Pure Small Value

The book is called exactly that: The Fundamental Index :D
by jaab
Mon Sep 15, 2014 5:55 am
Forum: Investing - Theory, News & General
Topic: Share your Hot-Rod Portfolio
Replies: 55
Views: 7519

Re: Share your Hot-Rod Portfolio

The Concentrated Country Craze:

labour income: 100% U.S.
stocks: 100% U.S. (TSM)
bonds: 100% U.S. (TBM)
SS: 100% U.S. (Gov)
pensions/annuities: 100% U.S.
real estate: 100% U.S. (TIAA-CREF/REITS/one's home)

"It’s a bold strategy, Cotton. Let’s see if it pays off for him." :D
by jaab
Sun Sep 14, 2014 10:15 am
Forum: Investing - Theory, News & General
Topic: Could you sleep with all your money in Berkshire Hathaway?
Replies: 66
Views: 11248

Re: Could you sleep with all your money in Berkshire Hathawa

The problem I'd see with BRK as one's only stock holding is not about "regular" returns or underperformance. BRK will likely continue to be some kind of largecap lowbeta/value/quality mix with a bit of inbuilt leverage. Which should at least get you results comparable to the market in the long run. After all, buying good, large companies for low prices will never end in a dotcom scenario. As worst case you may not find bargains anymore in the future, but even then we are not talking about a super high fee fund here. That said, any stock can go bankrupt or be subject to fraud or similar things, even if the probability is not high for BRK. In other words: there would be a small but catastrophic tail risk.
by jaab
Sun Sep 14, 2014 4:58 am
Forum: Investing - Theory, News & General
Topic: An Interesting Correlation
Replies: 22
Views: 3797

Re: An Interesting Correlation

nedsaid wrote:If you substitute Gold for commodities in a portfolio and balance the Long Term Treasuries with cash, you have the Harry Browne Permanent Portfolio.
Probem is that gold has only worked as inflation hedge in the VERY long run - think centuries, not 1, 5 or even 20 years. see http://papers.ssrn.com/sol3/papers.cfm? ... id=2078535 for example. the authors (Erb, Harvey) have done well known CCF research too, so no bias I think.
by jaab
Sat Sep 13, 2014 2:43 pm
Forum: Investing - Theory, News & General
Topic: Let me get this straight about SCV & factor diversification
Replies: 161
Views: 38835

Re: Let me get this straight about SCV & factor diversificat

Here is a good summary of the two approaches. holdings based vs. return based analysis: http://corporate.morningstar.com/au/doc ... tsheet.pdf

I also found the two longer studies mentioned at the end of the PDF above:
1) http://corporate.morningstar.com/dk/doc ... els_PK.pdf With lots of pictures/diagrams at the end, after the text. It's even written by the guy himself who invented all this style box stuff for M* (Kaplan)
2) http://corporate.morningstar.com/dk/doc ... MGJRJC.pdf
by jaab
Sat Sep 13, 2014 2:39 pm
Forum: Investing - Theory, News & General
Topic: Let me get this straight about SCV & factor diversification
Replies: 161
Views: 38835

Re: Let me get this straight about SCV & factor diversificat

Kevin, this whole ex post regression thing is not that reliable. Look at the 95% confidence intervals the PV site gives you when clicking detailed stats. Usually you better better results with a so called holdings based analysis. Morningstar does this for their style boxes, for example. Our problem is: we don't have the data (because $$$). Don't read to much into small regression differences. Too much "noise" all around.
by jaab
Sat Sep 13, 2014 1:43 pm
Forum: Investing - Theory, News & General
Topic: Why is REIT only sector fund recommended in slice & dice?
Replies: 113
Views: 12753

Re: Why is REIT only sector fund recommended in slice & dice

Valuethinker wrote:Since Rolf Banz came up with the SC effect, a lot of research has gone into it. It turns out that much of the effect is illusory: data on stocks that hardly traded, so an investor in any size could not have made those returns. This is particularly true of pre 1950 analysis.
It's mostly about methodology. But with GOOD news for long-only investors, surprisingly! see http://www.alphaarchitect.com/blog/2014 ... ect-exist/ for example.
by jaab
Sat Sep 13, 2014 7:02 am
Forum: Investing - Theory, News & General
Topic: The dangerous practice of rebalancing...
Replies: 191
Views: 21953

Re: The dangerous practice of rebalancing...

Possible confusion between owning index funds and owning an array of individual stocks. The paper is about risky, volatile investments in general. It doesn't really matter what investment vehicle you choose or if we are talking about stocks or a TSM fund or other asset classes. This due to one part of the paper talking about a stock becoming "worthless". Yes, individual companies can go bust and their stock become worthless. But when was the last time the S&P500 (an index fund owning those companies) became worthless? Does "never" ring a familiar bell? Wizard, risk is risk. Just because sometimes it is very small and didn't happen in the U.S. in the last two centuries doesn't mean the risk is not there. In other cou...
by jaab
Fri Sep 12, 2014 6:48 pm
Forum: Investing - Theory, News & General
Topic: The dangerous practice of rebalancing...
Replies: 191
Views: 21953

Re: The dangerous practice of rebalancing...

Rebalancing to a "Constant Mix" (CM) is a so called concave strategy, whereas "CPPI" for example is a convex one. The term convex/concave relate to the form of payoff diagrams. Both require action (buy/sell) as opposed to buy & hold and doing nothing (a linear payoff). Both strategies deviate from the market portfolio and thus may work out or not, depending of what other investors are doing. The less people follow it the better the outcome and vice versa. If too much money tries to follow CM rebalancing, the return will get worse and worse. In other words: if not just a handful of LifeStrategy funds and balanced funds impements CM rebalancing, but also all the other large institutional investors, they will run into p...
by jaab
Fri Sep 12, 2014 1:48 pm
Forum: Investing - Theory, News & General
Topic: Let me get this straight about SCV & factor diversification
Replies: 161
Views: 38835

Re: Let me get this straight about SCV & factor diversificat

That isn't exactly what Fama-French implied, was it? When did we learn this, and how well did investing like that work after we learned it?
lee, F/F have always used 5x5 "buckets" (or even 10x10) in their studies, not just published the aggregated single values of HmL and SmB. I think it has not been a secret that there are differences between the quintiles/deciles and it is a good idea to look at the details. If John Doe sales rep knows about this is another question, of course. :wink:
by jaab
Fri Sep 12, 2014 12:54 pm
Forum: Investing - Theory, News & General
Topic: Should I care about large cap value?
Replies: 17
Views: 2732

Re: Should I care about large cap value?

Browser wrote:It might be worth pointing out that the 1972-1976 period of outperformance of LCV (data from Simba) is based on the Fama-French research data, which is the return of the cheapest third of stocks sorted by price/book minus the most expensive third (High minus Low, or HmL).
The data in the Simba spreadsheet probably is the F/F LV portfolio from the 3x2 file, which is long-only too. Otherwise it would make no sense to call it LV.

An advantage of LV is long term investability. There can be more money put into LV than tiny SV and funds can be run cheaper (liquidity, transaction costs).
by jaab
Fri Sep 12, 2014 12:39 pm
Forum: Investing - Theory, News & General
Topic: Let me get this straight about SCV & factor diversification
Replies: 161
Views: 38835

Re: Let me get this straight about SCV & factor diversificat

Browser, maybe you would like to take a second look at your analysis? And as a follow-up, using PV I looked at the factor loadings of Vanguard's LCV fund (VIVAX) vs. TSM and found that VIVAX loads 0.31 on value, while TSM loads 0.02, for the period 1993-2013 (longest available for VIVAX). Yet the returns of VIVAX and TSM were virtually the same over this 21 years (CAGR=9.3% for both, with same Sharpe). If you use a three factor regression at the PV site ( here ), you see two things: Vanguard LV holds bigger companies (SMB -0.16 vs. 0.00 for Vanguard TSM) and shows an alpha difference to the TSM fund of 0.75 per year (0.90 vs. 0.25). If you switch to a four factor regression you see the reason for this behaviour: Momentum of -0.08 (LV) vs. -...
by jaab
Thu Sep 11, 2014 4:22 pm
Forum: Investing - Theory, News & General
Topic: Buffett: Modern investment theory is horse-pucky
Replies: 119
Views: 15283

Re: Buffett: Modern investment theory is horse-pucky

Don't know why this author's quote is seen as special? He just says that what is often marketed as "uncorrelated return" (e.g. HF, PE) usually has a hidden beta to some (risk) factor, be it inflation/growth/whatever (macro models) or the ones in micro/fundamental model (market, value, size, liquidity, ...). All this showed up in 2008. This is common knowledge I think?
by jaab
Thu Sep 11, 2014 2:30 pm
Forum: Investing - Theory, News & General
Topic: What tools are you using to compare ETFs?
Replies: 3
Views: 953

Re: What tools are you using to compare ETFs?

etf.com
portfoliovisualizer.com
by jaab
Thu Sep 11, 2014 12:33 pm
Forum: Investing - Theory, News & General
Topic: Buffett: Modern investment theory is horse-pucky
Replies: 119
Views: 15283

Re: Buffett: Modern investment theory is horse-pucky

baw703916 wrote:Fama was absolutely adamant that it was absolutely 100% "I guarantee it!" risk based.
What baffles me is that Fama also likes to define himself as an "empirical researcher". Which is true, he has done lot's of empirical studies and even invented some testing methodology like the Fama/McBeth procedure. But when it comes to draw conclusions from this empirical work, there is always this huge theory based elephant in the room, called risk story. :D
by jaab
Thu Sep 11, 2014 11:33 am
Forum: Investing - Theory, News & General
Topic: Buffett: Modern investment theory is horse-pucky
Replies: 119
Views: 15283

Re: Buffett: Modern investment theory is horse-pucky

There is a piece about this question in the current CFA mag: http://www.cfapubs.org/doi/pdf/10.2469/cfm.v25.n5.5 (start lower half of page)
by jaab
Tue Sep 09, 2014 12:05 pm
Forum: Investing - Theory, News & General
Topic: If no access to DFA, Small Value worth it?
Replies: 30
Views: 5820

Re: If no access to DFA, Small Value worth it?

If I remember Larry correctly, DFA's AuM have increased by a good amount and now they try to push their so called "Targeted Value" funds, which are more of a midcap-smallcap value mix, I think. So asset bloat is may be a problem for DFA, at least going forward.
by jaab
Tue Sep 09, 2014 11:12 am
Forum: Investing - Theory, News & General
Topic: John Hussman, smart guy, should you listen to his forecasts
Replies: 76
Views: 13256

Re: John Hussman, smart guy, should you listen to his foreca

Has not outperformed what? BRK is up fourfold versus the S&P500 over the past 15 years. a systematic multifactor model, I'd assume. keep in mind that those models are not a new invention but go back to the 1970s with guys like Stephen Ross (APT model), Robert Merton (ICAPM), Barr Rosenberg (BARRA consulting, now part of MSCI and Rosenberg Investments, now AXA Rosenberg) and others. They improved the more or less failed single factor CAPM from the 1960s, be it with macroeconomic factors or microeconomic ones as proxy for macro influences (mainly Rosenberg). Much of what had been considered skill (alpha) before turned into plain factor exposure. In fact, the famous Fama/French model is a huge step back compared to Rosenberg's practitione...
by jaab
Tue Sep 09, 2014 7:14 am
Forum: Investing - Theory, News & General
Topic: Less than 30% of active fund managers beat their benchmarks
Replies: 18
Views: 1720

Re: Less than 30% of active fund managers beat their benchma

I find it more interesting to compare manager funds to actual investable alternatives: real index funds, not just models. See http://www.alphaarchitect.com/blog/2014 ... ve-debate/ for example. Despite the site's name (Alpha Architect, no less) they provide nice summaries of academic studies or serious backtests in their blog. So if you know what I mean with the quote "here is a summary of their findings", you may like this blog, too.
by jaab
Tue Sep 09, 2014 5:05 am
Forum: Investing - Theory, News & General
Topic: Are there any real total bond funds?
Replies: 65
Views: 5147

Re: Are there any real total bond funds?

There is a Multiverse Index (with fact sheet) though. Global Agg. + Global HY, but excluding inflation linked bonds. And there are no products to buy it USD-hedged for, say, 0.15% ER anyway. :(
by jaab
Sat Sep 06, 2014 7:10 am
Forum: Investing - Theory, News & General
Topic: Are there any real total bond funds?
Replies: 65
Views: 5147

Re: Are there any real total bond funds?

Because there isn't any single unified bond exchange, choices of what counts as part of "the bond market" are somewhat arbitrary, but high yield bonds are a fundamentally different asset class from investment-grade bonds. " There is a clear difference between AAA Gov (zero defaults so far ) and everything else including AAA corporate. You can see that when looking at tables of ratings mapped to defaults (and recoveries) provided by the rating agencies. sometimes they include lorenz curves, too. credit risk is not linear, but there is no further "fundamental difference". And yes, of course, if something is labeled "total bond market" I expect HY, TIPS and Munis in it! It's not sold as Vanguard Barclays Agg...
by jaab
Sat Sep 06, 2014 3:53 am
Forum: Investing - Theory, News & General
Topic: How is tilting any different that active value investing
Replies: 55
Views: 4565

Re: How is tilting any different that active value investing

packer, I did not say the difference between systematic and idiosyncratic is the one between active or passive. quite the opposite, I gave some examples of clearly free-lunch-chasing value investors who runs some screens and call it a day. yes, indeed, many people claiming to do fundamental stock analysis just end up with systematic factors. i.e. they are not needed (the fund managers). Everything not the full market portfolio is just on a continuum of active anyway. did you not read my very first post? but active (deviation) is not a bad thing, it depends why you thing you should deviate from the market (e.g. less risk, more risk, free lunch, hedging something, ...) and how sure you can be your optionion is correct. in the bond market load...
by jaab
Fri Sep 05, 2014 6:01 pm
Forum: Investing - Theory, News & General
Topic: How is tilting any different that active value investing
Replies: 55
Views: 4565

Re: How is tilting any different that active value investing

the only real difference I see is the one between systematic factors/screens and company specific/idiosyncratic ones. factors are about the former, 1930s Graham not so much. he still was about number crunching and empirical analysis, not about storytelling though! but since systematic factors like "value" or "quality/profitability" mirror the "oldschool" idiosyncratic ideas (buying good companies for cheap, ...) you can or cannot extend "Graham" to the systematic/diversification level. think of Grahams 1970s interview about "buying groups of stocks based on characteristics" or books like WWOW, the Quantitative Value book, Magic Formula book and so on. or think of the Frazzini/Pedersen study ...
by jaab
Fri Sep 05, 2014 1:44 pm
Forum: Investing - Theory, News & General
Topic: How is tilting any different that active value investing
Replies: 55
Views: 4565

Re: How is tilting any different that active value investing

packer, you are correct that anything that is not the market portfolio (i.e. "passive") can be written as the market portfolio + a deviation, a long/short factor (i.e. "active"). a stockpicker portfolio after doing anlysis by hand, DIY quantitative "value indexing" as the late B. Graham described it. A DFA, RAFI or Vanguard Value fund and so on. cost and effort needed will vary on circumstances (how much $$$, fund costs, your investment knowledge, ...). however, there are still different reasons why one may do so: free lunch (Graham/Mr. Market), more risk in general (because safe job and pension, ...), more risk and maybe a free lunch in stocks/less risk somewhere else (Larry). Or just a specific individual inv...
by jaab
Fri Sep 05, 2014 9:48 am
Forum: Investing - Theory, News & General
Topic: how do I find out PE10 of foreign stock markets?
Replies: 88
Views: 25592

Re: how do I find out PE10 of foreign stock markets?

4. I see the point of smoothing, but why PE10 and not PE7 or PE25? It doesn't really matter, it's all gradual anyway. You can throw in CAPE X, Tobin Q, mcap/gdp and several other measures and the composite will probably give you a more robust result. see http://gestaltu.com/2014/01/valuation-based-equity-market-forecast-q3-2013-update.html for example. the guys over there come to a very optimistic conclusion though. see http://www.alphaarchitect.com/blog/2014/08/22/tactical-asset-allocation-during-cheap-markets/ on the other hand for timing problems. Don't read to much into exact numbers - it's all just educated guessing. I'd say you can derive blurry(!) expectations for the next 10-20 and maybe identify once-in-a-lifetime highs (e.g. 1929...
by jaab
Thu Sep 04, 2014 3:40 pm
Forum: Investing - Theory, News & General
Topic: How much MOM to add to SCV in Larry portfolio?
Replies: 8
Views: 4161

Re: How much MOM to add to SCV in Larry portfolio?

Just a sidenote: -0.61 for size (MTUM) cannot be true. Even Vanguard Megacap oder a DJIA ETF only is at -0.25 or so. 12 month of monthly data is too short for stats. I would not trust the MTUM numbers.
by jaab
Tue Sep 02, 2014 6:28 pm
Forum: Investing - Theory, News & General
Topic: John Hussman, smart guy, should you listen to his forecasts
Replies: 76
Views: 13256

Re: John Hussman, smart guy, should you listen to his foreca

GMO has proven able to tactically allocate according to their views. e.g. GMO Benchmark Free Allocation fund vs. Lifestrategy Moderate: I am not so sure about that, countmein. Here I've put the fund into the PV site with global dev factors (higher R^2 than U.S. alone). As expected we see some exposure to value (HML), quality (QMJ) and low beta stocks (BAB, stand-alone because the unified market=beta factor doesn't work out). you will find some combination of these three showing up in everything labed "dividend investing" or "value investing" or "GARP" or such, often with some duration risk (for stocks!). okay, look at the alpha: 3.45%/year with a very low p-value. good guy Grantham, right? Not so fast. Here is...
by jaab
Sat Aug 30, 2014 9:57 am
Forum: Investing - Theory, News & General
Topic: Does anyone have 'Lazy Portfolios'?
Replies: 102
Views: 14326

Re: Does anyone have 'Lazy Portfolios'?

nobsinvestor, something like U.S. TSM + Int. TSM + U.S. TBM is a slice & dice portfolio, too. Especially when Int. TSM is not on par with US. TSM. But also regarding non-US bonds, inflation linked bonds, HY and so on. As any other tilt it can be written as the global capital market portfolio** + a deviation from that (= a long/short factor). and as it is with any other tilt there can be rational or irrational, good or bad, risk or free lunch based reasons to do so. Also, such a portfolio is not about "academic evidence" per se, just about low costs and simplicity.

** see http://papers.ssrn.com/sol3/papers.cfm? ... id=2352932
by jaab
Fri Aug 29, 2014 7:27 am
Forum: Investing - Theory, News & General
Topic: Swedroe Value Metrics
Replies: 9
Views: 1420

Re: Swedroe Value Metrics

Thanks Larry. Still looks like a pretty big difference compared to the one between B/P and CF/P. Some is expected of course, given the low profitability/quality exposure of B/P only portfolios. I mean, if it is so obvious, why did DFA (for example) rely on just B/P for so long?
by jaab
Fri Aug 29, 2014 5:03 am
Forum: Investing - Theory, News & General
Topic: Swedroe Value Metrics
Replies: 9
Views: 1420

Re: Swedroe Value Metrics

I have not done any calculations, but I can not really believe Larry's numbers: U.S. stocks 1952-2013, "average annual returns" of 4.43 (B/P), but 7.33 for E/P? Isn't this way too much of a difference?
by jaab
Thu Aug 28, 2014 6:14 am
Forum: Investing - Theory, News & General
Topic: What's "The Herd" doing today?
Replies: 52
Views: 5816

Re: What's "The Herd" doing today?

Middle wrote:For myself, whenever I try to contemplate the Herd, I get stuck trying to figure who the real drivers are behind the Herd. Because you have individual investors which could be your neighbor or shoe shine boy and then you have institutional investors. Who has more influence? How do you gauge institutional investors?

Better to stick to the plan, but I do enjoy the contemplation on this every now and then.
You can read this thought in more detail here: http://news.morningstar.com/articlenet/ ... ?id=647560
With another conclusion of course, I mean, this is Morningstar and he wants to keep his job. :wink:
by jaab
Wed Aug 27, 2014 5:46 pm
Forum: Investing - Theory, News & General
Topic: Warren Buffett and the S&P index fund
Replies: 23
Views: 2755

Re: Warren Buffet and the S&P index fund

Sooo, Mrs. Buffett will be on the other side of the SV trade in the future? Sounds good. :beer
by jaab
Tue Aug 26, 2014 10:52 am
Forum: Investing - Theory, News & General
Topic: Comments on MOAT ETF ?? - Morningstar Wide Moat Focus Index
Replies: 2
Views: 751

Re: Comments on MOAT ETF ?? - Morningstar Wide Moat Focus In

I think Samuel Lee did a good analysis: https://screener.fidelity.com/ftgw/etf/ ... orningstar

The text layout in the above link is a bit of a failure, if you have a seekingalpha account you can read it here: http://seekingalpha.com/article/1954541 ... e-moat-etf

Note that it is a pretty expensive ETF for Largecaps. Maybe you want to look for Vanguard's VIG ETF instead (0.1% ER)? It's also basically a LC Quality/Value mix. See here for a VIG analysis: http://news.morningstar.com/articlenet/ ... ?id=643125
by jaab
Tue Aug 26, 2014 8:12 am
Forum: Investing - Theory, News & General
Topic: Due diligence on RAFI Pure Small Value
Replies: 189
Views: 28678

Re: Due diligence on RAFI Pure Small Value

So, in other words the style drift is a feature, not a bug, and Rob Arnott DID invent something himself (regarding retail client products)? Ha, take that, Asness! :D