Constructing a Global Capital Market-Weighted Asset Allocation ?

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Fat-Tailed Contagion
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Constructing a Global Capital Market-Weighted Asset Allocation ?

Post by Fat-Tailed Contagion » Fri Nov 13, 2015 8:20 pm

Bogleheads,

If I wanted to construct a portfolio of market-weighted funds that represented the global capital markets in true proportion, what would it look like ?

Thank you,

FTC
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Re: Constructing a Global Capital Market-Weighted Asset Allocation ?

Post by nisiprius » Fri Nov 13, 2015 8:31 pm

It would look like Mebane Faber's new ETF. The one with the ticker symbol that's almost exactly the same as the ticker symbol of his other ETF, the one that did poorly and that he abandoned. I've got it, it's on the tip of my tongue.

GAA.

It would look like GAA.

http://www.cambriafunds.com/gaa.aspx
GAA Cambria Global Asset Allocation ETF
The Cambria Global Asset Allocation ETF (NYSE: GAA) utilizes a quantitative approach to manage a diversified portfolio of global asset classes. The Cambria Global Asset Allocation ETF uses a buy and hold strategy that aims to reflect the market portfolio of investable assets.

The Cambria Global Asset Allocation ETF targets investing in approximately 29 ETFs that reflect the global universe of assets consisting of domestic and foreign stocks, bonds, real estate, commodities and currencies.
Since inception in 12/09/2014, $10,000 invested in GAA would now be $9,588.71. The same amount invested in the most boring balanced fund in the world, Vanguard Balanced Index Fund--U.S. only, no tilt, no asset classes but securities--would now be $10,075.27. That's not even a year and means nothing at all.
Last edited by nisiprius on Fri Nov 13, 2015 9:55 pm, edited 1 time in total.
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Re: Constructing a Global Capital Market-Weighted Asset Allocation ?

Post by lack_ey » Fri Nov 13, 2015 8:39 pm

nisi: GTAA? The tactical/market timing thing, formerly run by Faber. Theoretically they parted ways because he was launching overlapping funds at Cambria and not because of underperformance, but who knows.

GAA has weird tilts in it and isn't really representative anyway.

Here is an article but has dated figures from 2011:
http://www.pragcap.com/is-the-global-fi ... -strategy/

It really depends what you consider global capital markets, though. Does privately held real estate count? Private equity? Then there are structures like hedge funds that are listed above but in turn invest partially in assets already included such as stocks, so there's some double counting. Are currencies a capital market? Commodities? Financial derivatives?

Even just for stocks and bonds, do you float adjust or not?

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Re: Constructing a Global Capital Market-Weighted Asset Allocation ?

Post by alex_686 » Fri Nov 13, 2015 8:57 pm

Fat-Tailed Contagion, What do you mean by "true proportion"?

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Re: Constructing a Global Capital Market-Weighted Asset Allocation ?

Post by small_index » Fri Nov 13, 2015 9:16 pm

...
Last edited by small_index on Sat Dec 12, 2015 1:16 am, edited 1 time in total.

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Re: Constructing a Global Capital Market-Weighted Asset Allocation ?

Post by Fat-Tailed Contagion » Fri Nov 13, 2015 9:31 pm

alex_686 wrote:Fat-Tailed Contagion, What do you mean by "true proportion"?
Global market weighting.
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Re: Constructing a Global Capital Market-Weighted Asset Allocation ?

Post by Fat-Tailed Contagion » Fri Nov 13, 2015 9:31 pm

small_index wrote:OP - Any reason you didn't bring this up in your prior thread?
viewtopic.php?f=1&t=177592
Nope.
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Re: Constructing a Global Capital Market-Weighted Asset Allocation ?

Post by nisiprius » Fri Nov 13, 2015 10:00 pm

Fat-Tailed Contagion wrote:
alex_686 wrote:Fat-Tailed Contagion, What do you mean by "true proportion"?
Global market weighting.
Just to point out the obvious: there isn't a single global market in which all assets are traded freely, a market in which assets reach equilibria against each other and not against other assets of the same kind; a market in a single global currency, so that we are not all wearing currency-risk goggles, in which I see a pair of assets through dollar-colored glasses and someone else sees them through Euro-colored glasses.
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Re: Constructing a Global Capital Market-Weighted Asset Allocation ?

Post by Fat-Tailed Contagion » Fri Nov 13, 2015 10:02 pm

nisiprius wrote:
Fat-Tailed Contagion wrote:
alex_686 wrote:Fat-Tailed Contagion, What do you mean by "true proportion"?
Global market weighting.
Just to point out the obvious: there isn't a single global market in which all assets are traded freely, a market in which assets reach equilibria against each other and not against other assets of the same kind; a market in a single global currency, so that we are not all wearing currency-risk goggles, in which I see a pair of assets through dollar-colored glasses and someone else sees them through Euro-colored glasses.
Ok, whatever you think would be close to ideal and practical.
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Re: Constructing a Global Capital Market-Weighted Asset Allocation ?

Post by dratkinson » Sat Nov 14, 2015 8:37 am

VTWSX/VT (Vanguard Total World Stock Index Fund/ETF)?
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Fat-Tailed Contagion
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Re: Constructing a Global Capital Market-Weighted Asset Allocation ?

Post by Fat-Tailed Contagion » Sat Nov 14, 2015 1:16 pm

“The intelligent investor is a realist who sells to optimists and buys from pessimists.” | ― Benjamin Graham, The Intelligent Investor

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Re: Constructing a Global Capital Market-Weighted Asset Allocation ?

Post by asset_chaos » Sat Nov 14, 2015 4:57 pm

total bond 25%
total international bond 25%
emerging market bond 10%
total world stock index 40%

would be reasonably close in round numbers to the current global capital markets.

By the way, if you google "size of global capital markets" reasonable estimates for size of stock and bond markets pop up.
Regards, | | Guy

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Re: Constructing a Global Capital Market-Weighted Asset Allocation ?

Post by fundtalk » Sat Nov 14, 2015 5:23 pm

Here's another post from Cullen Roche who has written quite a bit about this.

http://www.pragcap.com/is-the-global-fi ... -strategy/

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Re: Constructing a Global Capital Market-Weighted Asset Allocation ?

Post by hafius500 » Sat Nov 14, 2015 5:43 pm

nisiprius wrote:
Fat-Tailed Contagion wrote:
alex_686 wrote:Fat-Tailed Contagion, What do you mean by "true proportion"?
Global market weighting.
Just to point out the obvious: there isn't a single global market in which all assets are traded freely, a market in which assets reach equilibria against each other and not against other assets of the same kind; a market in a single global currency, so that we are not all wearing currency-risk goggles, in which I see a pair of assets through dollar-colored glasses and someone else sees them through Euro-colored glasses.
Sorry , but this is nonsense.
prior username: hafis50

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Re: Constructing a Global Capital Market-Weighted Asset Allocation ?

Post by nisiprius » Sat Nov 14, 2015 7:27 pm

Image

For comparison, Vanguard LifeStrategy Moderate Growth:

Image
Annual income twenty pounds, annual expenditure nineteen nineteen and six, result happiness; Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.

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