Back testing is one of the most misused tools in investment management. Almost every back test outperforms the market, but those same strategies often struggle when run with actual money. In this episode, we discuss the reasons why back tested results often don’t translate into the real world and talk about some things to look out for when evaluating back tests. We discuss: Why human emotion can be an issue in back tests even though… Read More
In this week’s episode of Excess Returns, we talk about the biggest lessons from the first year of our Five Questions interview series. Our Five Questions series features in depth interviews with leaders in the investing industry. We discuss the five most important lessons we learned from our interviews with Jim O’Shaughnessy, Corey Hoffstein, Michael Mauboussin, Ben Hunt and Wes Gray. We discuss the following lessons: Corey Hoffstein – Beware of the Risks You… Read More
Picking the right value metric can be one of the biggest challenges of quantitative value investing. Although the Price/Book is the most widely used value metric, its struggles in recent years and valid concerns that have been raised about its viability in a world dominated by intangible assets have led many to question whether it still works. But the other widely used value metrics also have their own problems. In this week’s episode, we discuss… Read More
We have just completed market prediction season. It’s the time of year where there are countless forecasts about what the economy will do in the new year. Its when experts tell you what interest rates will do for the year. And most of all, its when you see a variety of predictions for where the S&P 500 is heading this year. The experts making these predictions even do you the favor of giving you exact… Read More
As difficult as it is to figure out the right stocks to buy, determining when to sell can be even more challenging. In this episode, we look at the important factors to consider when deciding when to sell and develop a systematic sell framework that can be used for both quantitative and traditional investors. We discuss: Why it is important to develop a sell strategy up front How to limit the impact of emotion and… Read More
Confirmation bias is one of the biggest problems in investing. We all have a set of core beliefs, and we tend to surround ourselves with people who also believe them and focus on information that validates them. That can be dangerous, though, because it can blind you to valid arguments that contradict your own. In this episode, we challenge our belief in value investing and discuss some of the reasons why we could be wrong.… Read More
Many value stocks are cheap because they deserve to be. Some of them no longer have sustainable businesses, and as a result their current discounted multiple will look really expensive relative to where their business is headed. These types of stocks are often referred to as “value traps” and value investors do everything they can to avoid them. In this episode, we talk about value traps, why they are impossible to avoid completely, and some… Read More
Whether you are training for and participating in a 25+ mile march or are saving and investing for retirement and long-term wealth creation, success requires the right mindset as well as discipline and patience. In this episode of Excess Returns, Justin Carbonneau talks with Jack Forehand about Justin’s participation in The March For The Fallen, a 28-mile ruck he participated in a few months ago with 35 lbs in his backpack to honor those who… Read More
Factor strategies have grown exponentially in the past decade. Almost every major asset manager now offers their variation of things like value, momentum, quality, and low volatility. But to use them properly, it is important to understand what they can and can’t do. In this week’s episode, we discuss the common misconceptions about factor strategies and what they can deliver for investors. We discuss the following myths: Factor strategies are less risky than the market… Read More
The market has always been tough to beat, but the ability to investors to gain inexpensive exposure to factors like value and momentum has made the job of active managers even harder. In this week’s episode, we talk about why the pursuit of alpha has become more difficult over time. We discuss: Why cheap ETFs that capture factor premiums have commoditized sources of return that used to be considered alpha How to judge the past… Read More
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