Quantocracy’s Daily Wrap for 01/07/2019

This is a summary of links featured on Quantocracy on Monday, 01/07/2019. To see our most recent links, visit the Quant Mashup. Read on readers!

  • You Would Have Missed 961% In Gains Using The CAPE Ratio, And That s A Good Thing [Meb Faber]

    961%. Thats the amount of gains you would have missed had you followed the market timing strategy Im going to describe in the following article that utilizes the CAPE ratio. Yes, thats significant. But theres far more to this story, and I suspect that had you acted on this strategy, youd have actually been quite happy to miss out on those gains. Lets start by rewinding a few
  • An Anatomy of Smart Beta Value ETFs [Factor Research]

    Smart beta Value ETFs are relatively homogenous Some show high exposures to other equity factors, which may represent risk Excess returns from smart beta are significantly lower than long-short factor returns INTRODUCTION The last ten years can be viewed as a lost decade for Value investors as excess returns were almost consistently negative. Although ETF investors have allocated more capital to
  • Is Multi-Manager Diversification Worth It? [Flirting with Models]

    Portfolio risk is traditionally quantified by volatility. The benefits of diversification are measured in how portfolio volatility is changed with the addition or subtraction of different investments. Another measure of portfolio risk is the dispersion in terminal wealth: a measure that attempts to capture the potential difference in realized returns. For example, two equity managers that each
  • The fundamental value trap [SR SV]

    Fundamental value seems like a straightforward investment approach. One simply looks for assets that are cheap or expensive relative to their rationally expected risk-adjusted discounted cash flows. In reality, conscientious estimation of fundamental value gaps is one of the most challenging strategies in asset management. It requires advanced financial modeling and often long waiting
  • 2018 Volatility Recap [Quintuitive]

    2018 brought more volatility to the markets, which so far has spilled into 2019. Lets take a look at the long term volatility history picture using the Dow Jones Industrial Average: Indeed, 2018 was the most volatile year since 2011. Relatively speaking however, the volatility is on the low end for a bear market, which I believe started in late December. The above chart was produced using the

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