Excess Returns, Ep. 24: The Pros and Cons of 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. But the research suggests that factor timing strategies are extremely difficult to implement in practice. In this episode, we discuss the pros and cons of factor timing and look at some of the approaches that investors can use to time factors. We discuss: Why most investors should avoid attempting to… Read More

Excess Returns, Ep. 21: Psychology and COVID-19 with Dr. Daniel Crosby

In this week’s episode we shift gears a little from our usual investing focus. We wanted to spend some time talking about the current COVID-19 crisis and its impact on all of us as people. To do that, we brought in an expert of human psychology and behavioral finance, Dr. Daniel Crosby. Daniel is the author of the Behavioral Investor and the Chief Behavioral Officer at Brinker Capital. In the interview, we discuss: What we… Read More

Excess Returns, Ep. 20: The Limits to Lessons from Past Bear Markets

Whenever we are confronted with a bear market, we all want to figure out how it will play out. We want to know how big the decline will be. We want to know when it will end. We want to know what stocks we should buy to limit losses during it and to outperform the market after it. To answer these questions, our minds tend to point us to the simplest solution we can find.… Read More

Excess Returns, Ep. 18: Interview: Value Investing with Tobias Carlisle

In this week’s Excess Returns, we are trying something new. In addition to our regular episodes, we have decided to periodically talk to some of the people we respect most in the investment community to get their insights on the issues facing investors today.  For our first conversation, we talk to our friend Tobias Carlisle about value investing. Toby is probably the smartest value investor we know. He is the author of four books on… Read More

Excess Returns, Ep. 15: Some Thoughts on Market Panics

The argument that investors should stay the course during market declines is an easy one to make. It also in most cases is the correct one, since figuring out when to get out of the market, and when to get back in, is very difficult for most investors to do. Despite the strength of the stay the course argument, those of us who make it can sometimes fail to deliver it with the proper recognition… Read More

Excess Returns, Ep. 14: Some Thoughts on the Struggles of Factor Investing in the Past Decade

The long-term evidence to support factor investing is compelling. Academic work has shown that factors like value and momentum have produced an excess return relative to the market over time. But what occurred in the most recent decade was in many ways the opposite of what has happened over the long-term. Almost anything an investor did to get away from buying large growth companies over that period was a detraction from returns. In this episode,… Read More

Excess Returns, Ep. 12: The Pros and Cons of Trend Following

To say that the track record of market timers in general is dismal would be an understatement. There are so many factors that impact market returns that getting them all right is next to impossible. And even if you do, figuring out what is and is not already priced in can be an equally fruitless exercise. Despite the fact that forecasters have consistently failed to predict market turns, there is an option that can help… Read More

Excess Returns, Ep. 11: The Pitfalls of Back Testing

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

Excess Returns: Ep. 10: Lessons From Our Most Read Five Questions Interviews

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

Excess Returns: Episode 9: The Benefits of a Value Composite

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