Five Questions: Multi-Factor Investing with Liqian Ren

By Jack Forehand (@practicalquant) —   Factor Investing has proven itself over long periods of time. But there is a price that has to be paid for its outperformance. The individual factors such as value, momentum and quality all can have extended periods where they underperform the market. One way to smooth out the returns from the individual factors is to use them together in a multi-factor portfolio. When constructed properly, multi-factor portfolios can produce comparable returns… Read More

Factor Timing: Sin Less Than a Little

By Jack Forehand (@practicalquant) —   There is perhaps no issue that is the subject of more debate in the factor investing community than factor timing. We are all trained to buy low and sell high, and it is tempting to conclude that we can do the same thing with factors. For example, if value stocks have struggled for a long period of time and they are cheap relative to their history, it makes intuitive sense to… Read More

Learning from the Hierarchy of Investor Needs

By Justin J. Carbonneau (@jjcarbonneau) —  The original “hierarchy of needs” model was developed by Abraham Maslow in 1943. Maslow proposed the hierarchy as a way to understand human motivation and later extended it to human curiosity. The hierarchy can be viewed as a pyramid with layers, which included things like “physiological,” “safety,” “belonging and love,” “esteem,” and “self-actualization”. Each part builds off the one below, and before one could move up the pyramid the… Read More

The O’Shaughnessy Approach: Guarding Against Narrative-Loving Humans

An article in CityWire profiles the father-and-son investing duo of Jim and Patrick O’Shaughnessy, chief investment officer and chief executive respectively at quantitative money management firm O’Shaughnessy Asset Management. Jim O’Shaughnessy, who began his career in quantitative investing in 1987 and has authored four best-selling books on finance, explains, “We want to find as much empirical evidence that supports certain ways of selecting securities and – equally importantly – of ignoring securities that would fail… Read More

John Bogle: Passing of an Investing Icon

On January 16th, Vanguard announced the passing of its founder, often called the “father of indexing,” on the firm’s site: Mr. Bogle earned near-legendary status in the American investment community, it said, primarily due to the following achievements: He introduced the first index mutual fund for individual investors and, in the face of skeptics, stood behind the concept until it gained widespread acceptance. He drove down costs across the mutual fund industry by ceaselessly campaigning… Read More

Ray Dalio: Investors Unprepared for Next Bear Market

At the Greenwich Economic Forum last November, Bridgewater Associates founder Ray Dalio expressed concern that most stock investors are ill-prepared to handle the next bear market. This according to an article in Chief Investment Officer. Dalio, who said that the current bull market was driven by the Fed’s low interest rates, said “everybody’s sort of leveraged long,” adding that, “if you have a downturn, there’s not much ability for that downturn to be dealt with… Read More

Flat Yield Curve Inverted in December

An article published in Bloomberg early last month reported that “a section of the U.S. Treasuries yield curve just inverted for the first time in more than a decade,” with the spread between short-term and long-term instruments dipping to negative 1.4 basis points. The development, according to the article, “could be the first signal that the market is putting the Federal Reserve on notice that the end of its tightening cycle is approaching.” The five-year… Read More

Asia Shines Among Emerging Market Peers

A Bloomberg article reports that Asia’s economies have outperformed their peers, with Malaysia being at the top of the list. The article notes that Asia’s economies have “stronger buffers against headwinds like Federal Reserve policy tightening,” and that Malaysia’s current-account surplus, stable valuations and economic growth outlook earned it top ranking based on metrics ranging from “growth prospects to the state of the current account, sovereign credit ratings and stock and bond valuations.” Four of… Read More

Investors Getting More Comfortable with Factor Investing

An article in WealthManagement reports that factor investing has gained acceptance and an increase in demand, as evidenced by an Invesco study that involved interviews with key decision makers of more than 300 institutional and wholesale factor investors. “However,” the article continues, “the Invesco study highlighted that nearly half of the investors adopted factor investing for the first in 2015 or more recently.” The study also found that factor investing generally began with a single… Read More

Ivy League Endowments Have Lagged 60/40 Portfolios for a Decade

An article in Institutional Investor reveals the findings of a new study that shows how the nation’s elite school endowments have trailed a passive portfolio of 60 percent stocks and 40 percent bonds over the past ten years. According to Markov Processes International (MPI), the research and analytics firm that conducted the study, this is the first instance in the 16 years it has been collecting data that these elite colleges have lagged the indexed… Read More

AXA Sees “Glorious Chaos” in Credit Bear Market

According to AXA investment Managers, “corporate bonds have fallen so hard they’re officially in a bear market,” says an article in Bloomberg, adding that it “may not be a bad thing.” The article notes, “A string of corporate warnings and the worst returns in a decade may point to the end of the U.S. economic expansion—but AXA is eyeing a potential trough and buying opportunity in the ruins.” Chris Iggo, chief investment officer for fixed… Read More

Morgan Housel on the Psychology of Money

In an episode of The Motley Fool radio show, host Chris Hill talked to The Collaborative Fund’s Morgan Housel about the psychology of investing and how humans behave when it comes to money. Here are some highlights: ·      Housel referred to a 9000-word piece he posted on Twitter calledThe Psychology of Money, in which he asserted that “investing is not the study of finance, it’s the study of how people behave with money.” The most important… Read More