Equities

What to Make of 10-Year Small-Cap and Value Results

2016-01-14T13:55:55+00:00 Jan 2016|Equities|

Ken French’s recently updated global factor data shows the global size and value premiums were basically flat for the past 10 years (the value premium was actually about –1 percent per year over this span). This long-term historical result has surprised many people and naturally led some to ask whether these premiums can be expected in the future. Figure 1 graphs the one-, three-, five-, 10-, 15- and 20-year average size and value premiums using the global data set.

Smart Beta Can Be Smart But Is Not New

2015-11-13T03:49:11+00:00 Mar 2014|Asset Allocation, Equities|

I held off writing about smart beta strategies as long as I could. The world, after all, is awash in such pieces. I couldn’t ignore it any longer, though, because virtually every piece I’ve read that’s critical of smart beta misses one fundamental point: The term “smart beta” may be new (and has certainly been effective from a marketing perspective) but the underlying strategies themselves are not.

Is DFA’s New Research Flawed?

2015-11-13T04:18:10+00:00 Sep 2013|Equities|

Folks have been lighting up my inbox with questions and comments about an Advisor Perspectives pieceby Michael Edesess (link included for the three of you who may not have seen the piece … you three may also not be aware that Miley Cyrus appeared on the MTV Video Music Awards … link not included). The article is critical of DFA’s recent work on profitability. I’ll focus most of my comments on the contents of Edesess’s section entitled “How the DFA argument is flawed.”

How to Make Your Own Investment-Grade Corporate Bond Fund

2015-11-13T04:33:30+00:00 Jun 2013|Equities, Fixed Income|

Last week, I outlined how to construct a portfolio of stocks and high-quality bonds to replicate the returns of high-yield corporate bonds. This week I’m tackling investment-grade corporate bonds.The same basic logic as last week holds: There’s not much unique about investment-grade corporate bonds that you can’t achieve with a diversified portfolio of stocks and high-quality bonds. The only difference is you don’t need as much in stocks to replicate the returns of investment-grade corporate bonds as you do with high-yield corporate bonds. This is because high-yield corporate bonds are more similar to stocks because they both have substantial exposure to default risk. Investment-grade corporate bonds have less default risk and therefore aren’t as similar to stocks.

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