This year I’ve written a few times about using the 200-day Moving Average (200MA) as a market timing indicator. Evolved Perspective on the 200-Day Moving Average Since my last posts my appreciation for and complaints about 200MA have evolved. I previously wrote that if enough speculators begin blindly following the 200MA it could lead… Continue reading What a Difference a Day Makes (or, “Fooled by Look-Ahead Bias”)
Market Timing or Dynamic Risk Management?
Institutional investors have long been indoctrinated with the notions of stocks for the long run and the importance of remaining fully invested. As I touched on stocks for the long run in an earlier post, in this one I will address remaining fully invested. The argument in favor of remaining fully invested went like… Continue reading Market Timing or Dynamic Risk Management?
Instead of Seeking Alpha, Try Managing Sigma
In the investment world there has been an arms race going on for years: seeking alpha. Active managers seek alpha and investors seek managers with alpha. Quants seek alpha models and try to distinguish themselves by identifying new sources of alpha. Lately more and more investors say that what we used to think of… Continue reading Instead of Seeking Alpha, Try Managing Sigma
Fee Erosion: A Too-Often Overlooked Aspect of Investment Decisions
As an equity PM I used to tell clients who asked why we didn’t turn over their portfolio more often, “the only certainty in this business is that higher costs will lower your returns.” Morningstar has since admitted as much by conceding that a mutual fund’s expense ratio is a better predictor of future… Continue reading Fee Erosion: A Too-Often Overlooked Aspect of Investment Decisions
Eric Falkenstein to Society of Actuaries: There Is No Risk Premium
When I accepted the Investment Section spot on the Society of Actuaries Annual Meeting planning committee, the first person I thought of to invite to speak was Eric Falkenstein. Eric Falkenstein is a quant, an author, and a blogger. He has a PhD in Finance from Northwestern University’s Kellogg School of Management. He has developed… Continue reading Eric Falkenstein to Society of Actuaries: There Is No Risk Premium
Risk Parity Portfolios Aren’t Always Less Volatile Than Market Weight Portfolios
I ran across a nice piece on Risk Parity by Portfolio Probe. These days it’s rare that anyone other than Wai Lee at Neuberger Berman acknowledges that Risk Parity has broader applications than simply overweighting bonds with respect to equities. One point I’d like to make on the Portfolio Probe post: like the author, I… Continue reading Risk Parity Portfolios Aren’t Always Less Volatile Than Market Weight Portfolios
A Glimpse at Morningstar Direct’s Asset Allocation Tool Enhancements
As a Chicagoan I spent much of my professional career with peripheral awareness of Morningstar, but not too much first-hand familiarity. Since the firm began as a mere collator of publicly available data on mutual funds Morningstar has come a long way and so has my appreciation of its offerings. These days I rely… Continue reading A Glimpse at Morningstar Direct’s Asset Allocation Tool Enhancements
Looming Demographic Trends and Their Investment Implications
Another popular session I moderated at the Society of Actuaries annual meeting was #132, Looming Demographic Trends and Their Investment Implications. This session featured Jason Hsu, CIO of Research Affiliates, and Richard Hokenson, of Hokenson & Company. Dr. Hsu had the floor for the first 30 minutes. He presented Research Affiliates’ increasingly renowned view on… Continue reading Looming Demographic Trends and Their Investment Implications
An Inconvenient Truth about Stocks for the Long Run
At last week’s Society of Actuaries annual meeting I moderated several sessions to which I have alluded in this space before. One of the best received presentations was by Lubos Pastor from the University of Chicago Booth School of Business. Pastor, a graduate of Wharton and student of Jeremy Siegel, presented a wake-up call for… Continue reading An Inconvenient Truth about Stocks for the Long Run
Financial Literacy Depends on Awareness of the Real World and Understanding Incentives
Recently a former coworker called me up with bad news and a plea for help: her husband had suddenly died and now she needed to decide what to do with her assets. Like a lot of widows, previously she had relied on her husband to make all the financial decisions. She asked me to… Continue reading Financial Literacy Depends on Awareness of the Real World and Understanding Incentives