By Jack Forehand, CFA (@PracticalQuant) Confirmation bias is one of the most damaging biases in investing. All of us want to be right. We all want to think that opinions that disagree with ours don’t have sensible arguments to support them. So we gravitate toward people who agree with ours. Whether it be in our personal relationships, or our virtual ones through things like social media, we all unconsciously want to seek out validation that… Read More
By Jack Forehand (@practicalquant) When the market pulled back in early 2018, I had just started writing publicly. It was my first chance to write an article offering my take on what investors should do during market declines. And I wanted to take advantage of the opportunity, so I brought out all the plays from my stay the course playbook. I talked about how stocks are the best long-term investment there is, and I threw… Read More
Asset Management has become a more challenging place to make a living in the past decade. On the strategy side, alpha has become much more difficult to generate, as skill within the industry and computing power have risen and factor-based strategies have become more widely available. On the business side, falling fees and increasing market share for the largest players have made it very difficult for smaller firms to compete. But despite that, some smaller… Read More
The ETF landscape has been undergoing significant change in recent years. Although the lowest fee products and the largest providers continue to dominate, several new trends have the potential to shake things up in the coming years. Proponents of things like ESG think they will change the ETF space in major ways. And supporters of Direct Indexing think it has the potential to upend the ETF industry as a whole. But there have been many… Read More
By Jack Forehand, CFA (@practicalquant)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. Whether the explanation of that excess return is risk or behavior–based, or a combination of both, is the subject of significant debate, but there is little doubt that there have been premiums associated with factors over the long-term. But what occurred… Read More
When we look at the past in investing, all of us have a tendency to want to find the simplest explanations for the things that occurred. But beneath the surface, there is often much more going on than meets the eye. I recently wrote an article where I looked at the top five most read interviews we did in the past year for our Five Questions series and the major lessons from each of them.… Read More
That lesson has not customarily been taught in business schools, where volatility is almost universally used as a proxy for risk. Though this pedagogic assumption makes for easy teaching, it is dead wrong: Volatility is far from synonymous with risk. -Warren Buffett Risk is one of the most challenging concepts to define in investing. There are countless ways to measure it and a myriad of opinions on the proper way to evaluate it. And the… Read More
By Jack Forehand (@practicalquant) It was a cold October day in 2016. I woke up at 3 AM to fly to see the biggest institutional client we had in our investment management business. We had jointly launched two funds with them in 2007 with a small seed investment they provided. Their head of new products had been a subscriber to our research website and had the idea to develop funds based on the quantitative strategies… Read More
By Jack Forehand (@practicalquant) We have just passed the one-year mark of our Five Questions interview series. When we first launched the series, I wasn’t sure how it would go. I didn’t know if we could get the types of interesting guests I was hoping for. I also wasn’t sure if I could ask the quality questions it would take to make the interviews interesting (I still am not sure about that). Despite the apprehension… Read More
By Jack Forehand (@practicalquant) — It’s that time of year again. The time of year where all the market experts make their 2020 predictions. You will see countless forecasts about what the economy will do in 2020. You will see many experts tell you what interest rates will do next year. And most of all, you will see a variety of predictions for where the S&P 500 is heading this year. The experts making these… Read More