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Results 151–200
of 263 found.
Forecasting Returns: Simple Is Not Simplistic
by Jim Masturzo of Research Affiliates,
The value of a forecasting model is that it improves on the alternative models available and classifies the forecaster’s knowledge of asset classes into an economically intuitive framework for building portfolios. A yield-based model is simple, but it checks both boxes.
Intelligent Design Sustainable Income
The AND principle means building in desirable features without the trade-offs that conventional thinking considers inevitable. Case in point: an equity income index holding liquid, quality stocks with high dividend yields. (1) The AND principle holds that creative product design can surmount some trade-offs that conventional thinking considers unavoidable.Simple investment strategies are easier to govern than complex ones and may be less likely to result in catastrophic outcomes. A simple new design demondemonstrates that income-oriented indices need not trade off yield for capacity & quality.
From Brutish to a Brouhaha: Shifting Winds and the Demographic Payback
by Michael Aked of Research Affiliates,
Continued pension reform inaction combined with a falling worker-to-retiree support ratio is leading to an inevitable economic and social clash between employees, employers, and their governments.
If Factor Returns Are Predictable, Why Is There an Investor Return Gap?
by Jason Hsu of Research Affiliates,
In the latest piece from Research Affiliates, vice-chairman and co-founder Jason Hsu looks at how substantial evidence supports cyclicality in factor returns, making them predictable. Evidence also exists that indicates investors aren't fully benefiting from this insight due to behavioral biases. But contrarian investors practicing countercyclical timing can benefit.
Black Ice: Low-Volatility Investing in Theory and Practice
Equity investors have endured two extreme market downturns since the turn of the century. The broad U.S. market, represented by the S&P 500 Index, fell by 44% in the aftermath of the dot-com bubble and 51% in the great recession. These devastating experiences reawakened institutional and individual investors to the downside of market volatility and, for a while, prompted great interest in low-volatility investing.
How NOT to Wipe Out with Momentum
Momentum investors are like the surfers we watch from beaches along the Pacific coast. Both must catch a wave. Both attempt to ride it as it breaks. But the ability to glide away smoothly before being caught inside the inevitable crash(ing wave) that follows is what determines success.
Investing versus Flipping
Newport Beach may be known as home to PIMCO (and, of course, Research Affiliates). Locally, however, the business of Newport Beach is real estate finance. Many of my local friends have made a bundle in recent years flipping houses in Orange County (the OC). I have also purchased some houses over recent years, but as an investment rather than as a flip. In this article, I explain the difference between investing and speculating by sharing my personal experience investing in residential real estate.
The China Syndrome: Lessons from the A-Shares Bubble
by Jason Hsu of Research Affiliates,
The rapid rise and sharp decline of the A-shares market represents a massive redistribution of wealth, especially painful to uninformed investors who bought hot stocks near the peak. What should the Chinese government do now?
The Danger in "Debalancing"
Eat a balanced diet. Drilled into our brains since preschool, this advice falls squarely in the “duh, everybody knows that” camp. But it’s not just kids who need reminding. Parents and grandparents, as role models and dietary enforcers, do too. Common sense alone tells us this universally applicable dictum is the right way to eat. Different foods have different nutritional and caloric values. If we eat a wide variety of food groups, or as a five-year-old child is taught, “Eat a rainbow,” good nutrition is likely to take care of itself.
Are Stocks Overvalued? A Survey of Equity Valuation Models
In the latest piece from Research Affiliates, Chris Brightman, Chief Investment Officer, revisits the most commonly used equity valuation tools, comparing their respective strengths and weaknesses—and no metric is without its shortcomings. He explains Research Affiliates' approach to valuation, combining both absolute value and relative value. No matter the measurement, U.S. equity prices are high and long-term expected returns are low.
The Whole Story: Factors + Asset Classes
by Jason Hsu of Research Affiliates,
Every year we invite some of the investment industry’s most creative thinkers to speak about their work at the Research Affiliates’ Advisory Panel conference. Along with Nobel laureates Vernon Smith and Harry Markowitz, the speakers at our 14th annual meeting included Campbell Harvey, Richard Roll, Andrew Karolyi, Bradford Cornell, Andrew Ang, Charles Gave, Tim Jenkinson, and our very own Rob Arnott. The richness of the speakers’ presentations beggars any attempt to summarize them; I’ll limit myself to the points I found most intriguing and illuminating.
Greek Drama: Act 2
The old saying, “You can’t squeeze blood from a stone,” vividly describes the futility of trying to extract more resources from something than it has to give. The expectations the Greeks have for renegotiating their debts requires them to do exactly this, squeeze blood from a stone. Only by increasing tax collections can Greece reverse the painful reduction in government spending, services, and employment known as austerity.
The Market for “Lemons": A Lesson for Dividend Investors
Central banks the world over are buying high-quality bonds, thereby removing them from the market and forcing savers to find alternative strategies to meet their income needs. In this environment of financial repression and near-zero interest rates, dividend-yield (or equity income) investing has become increasingly popular. Investors are understandably reallocating their portfolios from lower yielding bonds to higher yielding equities. But in selecting equities with a high dividend yield, investors should be aware of the risk of concentrating their portfolios in low-quality companies.
The Market for 'Lemons': A Lesson for Dividend Investors
Central banks the world over are buying high-quality bonds, thereby removing them from the market and forcing savers to find alternative strategies to meet their income needs. In this environment of financial repression and near-zero interest rates, dividend-yield (or equity income) investing has become increasingly popular. Investors are understandably reallocating their portfolios from lower yielding bonds to higher yielding equities. But in selecting equities with a high dividend yield, investors should be aware of the risk of concentrating their portfolios in low-quality companies.
Not-So-Great Expectations: Why Real Interest Rates Won’t Soar
In a recent piece from Research Affiliates, Shane Shepherd, Senior Vice President, Head of Macro Research, looks at the consensus on interest rates: they are set to fly. But if, as Research Affiliates expects, savings accelerate and real GDP grows slowly, then interest rates won’t rise very much anytime soon.
Greek Drama
Alexis Tsipras, the new prime minister of Greece, was elected because he and the Greeks who voted for him oppose the austerity imposed by Greece’s creditors. Apparently, markets were shocked by this turn of events: Greek bond yields spiked and bank stock prices plunged as euros began flowing out of the country. But should this scene have been a surprise?
What's Up? Quantitative Easing and Inflation
The Fed has ceased its program of quantitative easing (QE) and may soon begin to raise interest rates. Japan has embarked on an even more aggressive program of QE. The European Central Bank (ECB) has just begun QE. In a related development, the Swiss National Bank (SNB) recently stopped pegging the Swiss franc to the euro. Many investors are asking, “What does all this monetary turmoil mean?”
There's Diversity in Value
A portfolio comprising long positions in individual fundamentally weighted country indices and short positions in cap-weighted country indices might prove to be the Boris Diaw of a diversified portfolio. Investors would be unlikely to meet their return targets by concentrating all their assets in such a strategy. However, given its high Sharpe ratio and low correlation with widely used asset classes, it seems a suitable addition to a robust asset mix.
What's Up? Quantitative Easing and Inflation
In a recent piece from Research Affiliates, Chris Brightman, chief investment officer, provides "Central Banking 101," noting that just within the last several months the Fed has ceased its program of quantitative easing (QE) and may soon begin to raise interest rates, Japan has embarked on an even more aggressive program of QE and the European Central Bank (ECB) has just begun QE. In a related development, the Swiss National Bank (SNB) recently stopped pegging the Swiss franc to the euro. Many investors are asking, ?What does all this monetary turmoil mean??
Yesterday?s Gone: Year-End Capital Markets Commentary and Expectations
With updated return expectations, we estimate that the performance of U.S. stocks and bonds over the next 10 years will be significantly lower than long-term historical averages. Other asset classes may produce moderately better returns.
The Promise of Smart Beta
by Jason Hsu of Research Affiliates,
Forty years ago, Jack Bogle helped revolutionize our industry for the benefit of the investor. Today there is opportunity for a second revolutionpromising to bring the same low costs and high transparency to additional equity factors. Can smart beta break free from the conventional objectives of asset gathering and obfuscation, and deliver on that promise? Jason Hsu provides his commitment and reasserts that of Research Affiliates to deliver on the promise of smart beta.
Busting the Myth About Size
Many market participants (including investors, product providers, and analysts alike) assume that, just as value stocks on average outperform growth, small-cap stocks on average outperform large-caps. Unlike value, however, and contrary to popular opinion, there is little solid evidence that stock size affects performance.
Go for the Gold: Commodities and Inflation
by Denis Chaves of Research Affiliates,
Unexpected inflation would be especially damaging to portfolio returns when asset class yields are low, but a modest amount of inflation protection can substantially mitigate the risk. Commodities can be effective hedges against inflationary shocks.
Our Investment Beliefs
The public launch of Research Affiliates interactive Asset Allocation website this month gives us an opportunity to describe the investment beliefs underlying our models, expected returns, and investment strategies. To be clear, our beliefs are constructs that help us make sense of the capital markets.
Retirement Planning: Millennials vs. Boomers
by Noah Beck of Research Affiliates,
Rob Arnott and Lillian Wu recently wrote that young workers are more likely than older ones to lose their jobs in an economic downturn.They are also prone to draw on their 401(k) plan to meet basic living expenses while they are unemployed. Given these facts, the early-phase concentration in equitieswhose market prices are roughly correlated with the business cyclemakes target-date funds inordinately risky for young investors. In this article, Noah Beck considers TDFs in the broader context of workers total assets, including their own human capital.
What Are We Doing to Our Young Investors?
In the latest piece from Research Affiliates, Rob Arnott, chairman and CEO, and Lillian Wu, researcher, look at the growing use of target date funds by young workers, and how their defined contribution (DC) portfolios are therefore increasingly concentrated in stocks. However, young workers are more likely to cash out their DC assets to meet living expenses during a recession or other hardship, and equity volatility could leave them in a bind. Arnott and Wu offer a potential solution: less risky starter portfolios.
Finding Smart Beta in the Factor Zoo
In the latest piece from Research Affiliates, Jason Hsu, Co-Founder and Vice Chairman, and Vitali Kalesnik, head of equity research, look at how the "publish-or-perish" syndrome and the smart beta movement have motivated academics and practitioners to come up with a spate of new investment factors. How can investors determine which ones are legitimate and how to use them in their equity portfolios?
The Outlook for Emerging Market Bonds
Emerging market bonds exhibit high real yields and improving credit quality. In addition, emerging market currencies are likely to strengthen. This article explains why emerging market bonds issued in local currencies might be a solid addition to a diversified portfolio.
The Moneyball of Quality Investing
Factor investing has rightfully gained adherents among investors seeking superior risk-adjusted returns. Our research reveals that quality is not a factor that reliably commands a premium in its own right. Nonetheless, value investing conditioned upon certain indicators of company quality is a promising strategy.
I'd Choose Emerging Markets, Wouldn't You?
by Ryan Larson of Research Affiliates,
Theres a lot of negativity about emerging market stocksso it makes sense for long-term, value-oriented investors to rebalance into the asset class. Heres why a systematically contrarian strategy like fundamentally weighted indexing might outperform.
The High Cost of Equal Weighting
Equal-weight indices have two clear advantages: They are easy to understand, and they generally outperform cap-weight indices over the long term. Their drawbacks are less apparent. They have higher turnover due to rebalancing than other smart beta strategies, and that turnover includes buying and selling lower-liquidity stocks. Our market impact model demonstrates that, as global assets under management increase, implementation costs tend to rise faster in equal-weight than in fundamentally weighted strategies.
The High Cost of Equal Weighting
Equal-weight indices have two clear advantages: They are easy to understand, and they generally outperform cap-weight indices over the long term. Their drawbacks are less apparent. They have higher turnover due to rebalancing than other smart beta strategies, and that turnover includes buying and selling lower-liquidity stocks. This article summarizes what we have learned about the relative performance of equal-weight indices before and after implementation costs.
Slugging It Out in the Equity Arena
Selling recent losers and buying recent winners is the antithesis of the systematic rebalancing discipline through which smart beta strategies earn long-term excess returns. Indeed, we contend that this procyclical behavior is what pays, over time, for the value added by fundamentally weighted index investing and other smart beta strategies.
Ukrainian Crisis: Should Investors Avoid the Russian Stock Market?
This is neither to treat the profoundly worrisome crisis in Eastern Europe cavalierly nor to advocate profiting, however indirectly, from the distress of Ukraine, a sovereign nation whose people have suffered horribly over the last three-quarters of a century. It is merely to caution international investors that, from a strictly financial perspective, withdrawing assets from Russia might not be the right move.
Results 151–200
of 263 found.
