Bubble, Bubble, Toil And Trouble

Key Points Q2 hedge fund letters, conference, scoops etc The authors define a bubble and an anti-bubble so that investors can avoid or select, respectively—in real time—the impacted assets or asset classes. Today, Tesla, bitcoin, and certain US technology stocks are valued far above their fundamentals and are well into bubble territory. [...]

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Dismiss MMT At Your Peril

Key Points Modern Monetary Theory (MMT) argues that governments with fiat currencies should coordinate treasury and central bank actions to fund government programs by directly printing money, unconstrained by tax receipts or borrowing capacity. Progressive politicians embrace MMT because the doctrine allows them to advocate substantial increases in social spending without [...]

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Rob Arnott: Are Valuations Irrelevant?

With US stock market valuations exceeding all historical valuation levels—except for those hit at the peak of the dot-com craze—Rob Arnott examines the subsequent performance of companies, which were at one time the largest companies in the world. Q1 hedge fund letters, conference, scoops etc Image source: Research Affiliates/Video Screenshot Rob Arnott: [...]

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The Inverted Yield Curve

Cam Harvey speaks to the currently inverted yield curve as an indicator of a slowing economy, further expounding on his Conversations of January 2019. Q1 hedge fund letters, conference, scoops etc janjf93 / Pixabay RA Conversations: The Inverted Yield Curve Cam Harvey, PhD Partner and Senior Advisor, Research Affiliates Professor, Duke University Jim Masturzo, CFA Senior Vice [...]

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Strike The Right Balance In Multi-Factor Strategy Design

Key Points Our analysis examines combinations of six factors (value, low beta, profitability, investment, momentum, and size) in simple long-only, investable portfolios that reflect real-world strategies. Based on our research, these six factors produce a substantial diversification benefit across return drivers. We find that selecting roughly a quarter of the investable [...]

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The History Of The Cross-Section Of Stock Returns

Juhani Linnainmaa cautions investors to be wary of alpha decay in newly discovered factors. Using fresh, pre-discovery data, his out-of-sample analysis shows about half of the many factors tested were not robust. Q4 hedge fund letters, conference, scoops etc mohamed_hassan / Pixabay Juhani Linnainmaa, PhD Partner & Advisor, Research Affiliates, and Professor, USC [...]

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Multi-Factor Design, Part 1 – Mixing vs. Integrating

We compare the two most popular multi-factor strategy construction methods of mixing and integrating, and recommend when each of the two strategies is the more suitable for an investor’s needs. Q4 hedge fund letters, conference, scoops etc rawpixel / Pixabay Registration is required to join this event. If you have not registered, [...]

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The Winning Formula: Mission + Culture + Team

Key Points At Research Affiliates, our winning formula focuses on mission, culture, and team. We believe a corporate culture that supports the development of its employees will in turn contribute to the long-term success of clients, partners, and the firm itself. We believe a firm’s culture is essential to fostering high-functioning teams [...]

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RA Conversations: The Flattening Yield Curve

Cam Harvey looks at the yield curve today through the lens of his 1986 pioneering work on yield-curve inversions and their foreshadowing of economic downturns. mohamed_hassan / Pixabay Q3 hedge fund letters, conference, scoops etc RA Conversations: The Flattening Yield Curve Cam Harvey, PhD Partner & Senior Advisor, Research Affiliates, and Professor, Duke University Jim [...]

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A Backtesting Protocol In The Era Of Machine Learning

Abstract Machine learning offers a set of powerful tools that holds considerable promise for investment management. As with most quantitative applications in finance, the danger of misapplying these techniques can lead to disappointment. One crucial limitation involves data availability. Many of machine learning’s early successes originated in the physical and [...]

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Alternative Risk Premia: Crisis or Opportunity?

Key Points We define and study the alternative risk premia (ARP) universe through four distinct core strategy types: equity neutral, volatility, trend, and macro. We believe that a host of underlying drivers, which include rising price volatility, individual factor investing risks, and implementation shortfall, among others, has contributed to the widespread [...]

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The Challenges Of Diversity Investing

Key Points Both academic research and our own experience indicate that the business case for corporate diversity is compelling as a result of higher collective intelligence. Testing the investment case for greater diversity faces two major challenges: insufficient historical data and difficulty in measuring whether the culture is one that embraces [...]

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Craftsmanship In Smart Beta

Key Points Investors seeking to add smart beta and factor strategies to their portfolios should consider the four craftsmanship elements of product design:  1) universe coverage and weighting mechanism, 2) signal definition, 3) measurement period, and 4) rebalancing frequency. Design decisions guided by these craftsmanship elements can help preserve a portfolio’s [...]

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Is Manager Selection Worth The Effort For Financial Advisors?

Key Points Investors, particularly retail investors, are predisposed to chase the returns of investment managers. The academic literature shows manager selection fails to produce positive excess returns, on average. A diligent manager research effort may shrink the large amount of negative alpha from clients’ performance chasing. Q3 hedge fund letters, conference, scoops etc Introduction This [...]

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Performance Measurement: How To Do It If We Must

Key Points Investment professionals can overdo performance measurement simply because technology makes it so easy and it seems a worthwhile task to constantly gauge if clients are on the path to meeting their long-term financial goals. Too often, however, “doing something” based on short-term performance measurement can degrade the long-term performance potential [...]

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Ignored Risks Of Factor Investing

Key Points The risks of factor investing are usually understated (perhaps, severely so), and the diversification benefits tend to be overstated. Because factor returns substantially deviate from normality and because correlations between factors are not constant over time, a multi-factor portfolio may retain exposure to the risk drivers of the individual [...]

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Smart Beta Strategy Selection – Pick The Right One!

Shifting your smart beta strategy selection focus to craftsmanship and cost. Learn what questions to ask and how to make better-informed decisions when investing in smart beta. Get The Timeless Reading eBook in PDF Get the entire 10-part series on Timeless Reading in PDF. Save it to your desktop, read it [...]

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When Value Goes Global

Key Points The value premium is traditionally associated with stock selection and market timing, however, value investing works just as well when applied globally across major asset classes. The alternative value portfolios we study are typically uncorrelated with their underlying asset classes, traditional value approaches, and each other, thereby offering meaningful [...]

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