The risk parity-versus-60/40 argument has always been about strategic long term — not tactical short term — asset allocation. Here I argue that, when viewed strategically, the empirical work on risk parity, including some of our own, understates its potential advantages. Moreover, all you need is basic finance theory to see it.
The term “smart beta” (including “Fundamental Indexing”) is just a new way to describe some well-known and well-tested investment ideas.
In its normal form the small firm effect is, on a host of dimensions, weak to possibly nonexistent. Once adjusted for quality exposure it is real and spectacular.
A recent interview with Professor Eugene Fama represents another sign that much confusion about momentum unfortunately remains. While my faith in Professor Fama is exceptionally high, this is one of the few topics where we fundamentally disagree. While debates and discussions about momentum will undoubtedly continue, in this post I’ve tried to sort out fact from fiction by bringing clarity regarding the facts and interpretations about momentum and debunk some myths along the way.
A recent interview with the economist Tyler Cowen, in which we cover the basics we believe in (value and momentum) and a lot of other topics.
Clearing up a misguided quibble over a previous post about the efficacy of the small-cap factor.