Asness versus Arnott: The Factor Timing Debate Continues

AQR Management founder Cliff Asness continues to argue that factor timing is “deceptively difficult,” contrary to what Rob Arnott of Research Affiliates would have you believe, says a recent article in Institutional Investor. Asness’ issue, the article says, is with Arnott’s contention that risk premia factors such as value, momentum, growth and volatility have become “overvalued as a result of the rising popularity of smart beta and factor investing strategies” and that investors should “time… Read More

Asness and Arnott Talk Market Timing, Smart Beta and Behavioral Biases

Maybe not always. At least that was the upshot of a debate between Cliff Asness of AQR and Rob Arnott of Research Affiliates, panelists at the recent Morningstar conference in Chicago. Although they debated various topics, they seemed to agree that value stocks deserve attention when they’re cheap. According to Asness, founder and managing principal at AQR, “Timing the market is hard and we call it a sin, but we recommend that investors sin a… Read More

The Payoff and Perils of Momentum-based Stocks

Many investors follow momentum-based methods or approaches when investing in equities, but does momentum investing actually work and what are the results? This is the basis for a recent AAII article by Charles Rotblut, CFA, vice president at AAII and editor of the AAII Journal. Relative price strength, which compares the price performance of a security to another security or the overall market or an industry, is one of the most popular ways to identify… Read More

Asness vs. Arnott on Smart Beta, Factor Timing, and Performance Chasing

Cliff Asness, co-founder of AQR Capital Management, added fuel to the debate over “smart beta” investing with a recent paper attacking arguments made by Rob Arnott of Research Affiliates. Arnott, once understood as a proponent of smart beta approaches due to his research and development of fundamental indexing, claimed that many smart beta exchange traded funds “have succeeded solely because they have become more and more expensive.” In an argument that Asness describes as alarmist,… Read More

AQR’s Asness on Fama, Momentum Investing and More

Clifford Asness, Managing and Founding Principle of AQR, writes in his “Cliff’s Perspective” blog about Nobel Laureate and Professor Eugene Fama’s views on momentum investing. Asness is a believer in momentum and, as he notes, wrote a dissertation on it under the supervision of Fama. Asness notes that “the long-term success of the momentum factor seems to be a challenge to many observers,” including Fama. Commenting on a recent interview with Fama, Asness notes that… Read More

AQR Tests Market Timing Techniques, Helping to Boost Long Term Returns

  A recent article by Cliff Asness and colleagues from AQR Capital Management challenges the academic finance recommendation to avoid attempts to time the market. “Sinning a little,” Asness and colleagues suggest, can boost returns.  Among other things, they suggested trimming exposure to stocks in October 2015, as the article went to print, by holding more cash. The article uses two core factors – valuation, measured by the cyclically adjusted PE (CAPE) factor made known… Read More

Arnott On Why It Wasn’t A Lost Decade

The “Lost Decade”: It’s a moniker that many stock market commentators have applied to the 2000s, a decade in which we saw two major bear markets and the S&P 500 benchmark ended up well in the red. But that doesn’t tell the whole story. “It was only a lost decade if you anchored on equities as your core holding and you relied on cap-weighting,” Rob Arnott of Research Affiliates tells Bloomberg. “It was a lost… Read More