Interesting, I wasn't aware of this option. But I'm not sure what to think. It seems like including QMJ results in some very strange outcomes for small cap value funds.jaab wrote:Nowadays you can select the Frazzini/Pedersen data set, not just F/F research and benchmark. Then you get two additional options; QMJ (Asness) and BAB (low beta).Ketawa wrote:Portfolio Visualizer doesn't incorporate profitability (PMU):
QMJ seems to be a better idea (multiple metrics), for similar reasons as for value, I think: vague concept in general (not like size), every single metrics has made or may make problems, every metric is just a second degree proxy in itself and may carry idiosyncratic noise or whatever. also there does not seem to be anything special about gross profitability: http://www.alphaarchitect.com/blog/2014 ... asurement/
Typically, we expect them to have <1.0 loading on Mkt-RF and negative Mom. But if you look at common SCV funds that have been around a long time like IJS, VBR, RZV, and DFSVX with the Frazzini/Pedersen data set and include QMJ, you generally get >1.0 loading Mkt-RF, positive Mom, and fairly large positive loads on QMJ.
Sufficiently diversified equity funds should have a Mkt-RF very close to 1.0. SCV funds we expect to be a little lower due to higher REITs, but most of these are over 1.1. IJS in particular is an outlier since it has 0.5 loading on QMJ and worse than -3% annual alpha. Seems strange since it has followed the same index its entire history.
I find it hard to accept that those numbers have a lot of value. The French/Fama numbers result in far smaller alphas in either direction and seem to do just as good a job at explaining returns.