Bonds And Premiums
Today we’ll turn our attention to the two risk premiums that help explain the performance of bond portfolios—term and credit. Unlike with the value premium, there’s no debate about whether these two factors earn premiums based on risk. They are...
Swedroe On Large-Stock Value Premium
Recently, we have seen a rise in the level of discussion about whether there is a significant value premium in large-cap stocks. The value premium is the tendency of stocks with low prices relative to measures of their value to...
Stock Performance In A Recession
It’s now been more than five years since our last recession. This most recent recession, caused by the financial crisis, officially began in December 2007 and lasted until June 2009, a period of 18 months. It was the longest of...
Forecasters Persistently Fail Us
A large majority of investors have seen their portfolios underperform simple buy-and-hold strategies, despite having followed the stock-picking and market-timing advice of so-called experts. These “experts” include pundits, gurus and forecasters such as Bill Gross, John Hussman, Nouriel Roubini, Meredith...
Why Some Anomalies Persist
The academic literature is filled with challenges to the efficient markets hypothesis. Perhaps the greatest among these challenges involves the existence of momentum and the poor performance of small-growth stocks and high-beta stocks. Beta is defined as the measure of...
Don’t Invest Without Discipline
A well-thought-out financial plan is necessary for successful investing, but even the greatest plan won’t bear fruit if an investor doesn’t have the discipline required to stay the course, rebalancing and tax-loss-harvesting as needed. Unfortunately, even thorough and intelligent plans...
Beware Tactical Asset Allocation
The financial crisis of 2008 has led to another surge in demand for funds using a tactical asset allocation (TAA) investment strategy. Morningstar currently classifies about 332 funds as tactical asset allocation funds. That’s up from just eight in 2007....
Look Before A Low Vol Leap
A number of academic papers have demonstrated within the last few years that low-volatility stocks have provided greater returns than higher-volatility stocks. As I’ve mentioned before, these findings run counter to economic theory, which predicts that higher expected risk is...
The Mystery Of Momentum
Momentum is a well-established, empirical fact. Its premium is evident in more than 87 years of domestic market data, in more than 20 years of out-of-sample evidence beginning from the time of its original discovery, in statistics from 40 other...
Private Equity Not Worth The Risk
Last week, I wrote in-depth about some of the problems with hedge funds, especially in terms of how they’re viewed and how they affect financial markets as a whole. I thought I’d begin this week with a closer look at...
