Active equity performance depends on the stock-picking skill and market conditions. Recent academic research confirms that returns to stock picking rises in tandem with increased stock return cross-sectional dispersion and skewness, along with greater market volatility.
“Animal spirits” were once again at large in global equity markets during the fourth quarter of 2017 as economic growth perked up in many parts of the globe and equity market returns followed in kind.
One of the prisms through which we analyze market and manager performance is that of common risk factors. A risk factor is a characteristic that is common to a broad universe of stocks that has three primary attributes...
Travel to clients abroad and preoccupation with my coming book on cycles (final draft submitted just the other day) have combined to keep me from writing a memo since September, but fortunately not from thinking. Thus I have ideas to set down on two significant subjects: the market environment and the new tax law. Further, I’m highly motivated to do so, since if I skip a few months, people start writing in, “Are you sick?”
This article talks through a selection of charts and indicators that will be key to watch to understand the risk and opportunity set for globally focused active asset allocators in 2018. The charts cover inflation, monetary policy, bond yields, gold, emerging markets, high yield credit, global equities, and China.
The relative performance of emerging markets has been unremarkable over the past decade, however meaningful changes have taken place in the fundamental and financial construct of the asset class that are relevant for asset allocators. Most notably, the composition of the index has seen dramatic shifts in sector, country, and stock constituents...
The investing industry is constantly devising new acronyms and buzzwords. Sometimes these can be dangerous. The rise of the FANG stocks highlights how clusters of stocks may create investing hazards that standard risk models struggle to detect.
In his recent article, Michael Edesess argued that multiple empirical “anomaly” studies and the wide use of regression are ruining finance research. While some of his points are valid, his conclusion that the entire set of academic studies should be discarded goes too far.
“There They Go Again . . . Again” of July 26 has generated the most response in the 28 years I’ve been writing memos, with comments coming from Oaktree clients, other readers, the print media and TV. I also understand my comments regarding digital currencies have been the subject of extensive – and critical – comments on social media, but my primitiveness in this regard has kept me from seeing them. The responses and the time that has elapsed have given me the opportunity to listen, learn and think. Thus I’ve decided to share some of those reflections here.
I’m in the process of writing another book, going into great depth regarding one of the most important things discussed in my book The Most Important Thing: cycles, their causes, and what to do about them. It will be out next year, but this memo will give you a preview regarding one of the most important cyclical phenomena.