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Working Paper
Beyond Direct Indexing: Dynamic Direct Long-Short Investing
May 3, 2023
On average, net losses realized by direct indexing loss-harvesting strategies taper off within the first few years after their inception, and these strategies also exhibit a high dispersion of net loss outcomes. We show that long-short strategies motivated by factor investing can significantly outperform direct indexing strategies from both a pre-tax and tax perspective.
Journal Article
International Diversification—Still Not Crazy after All These Years
May 3, 2023
International diversification has hurt US-based investors for over 30 years, but the long-run case for it remains relevant. We show that both financial theory and common sense favor international diversification, buttressed by empirical supportive evidence. Additionally we show it would be dangerous to extrapolate the post-1990 outperformance of US equities.
Quick Takes
Emerging Equities
April 10, 2023
Hear our quick take on emerging equities, where we’ll cover why – and why now – investors should consider re-visiting their allocations to this asset class.
White Paper
Re-Emerging Equities
March 28, 2023
The expected premium for investing in emerging versus developed equity markets is on the upper end of its past 25-year range. At the same time, many of the risks historically associated with emerging markets have secularly declined. We believe there is a strong case for investors to “re-up” their emerging allocations.
Perspective
Is Value Just an Interest Rate Bet?
August 11, 2022
It seems obvious to so many that interest rates drive the value trade. After all, growth stocks have much longer-dated cash flows than value stocks and thus should be a “longer duration” asset and move more with longer-term interest rates, right? This is taken as an axiomatic given in countless pundit and press observations. However, it’s not nearly that simple, and mostly it’s just not true.
Quick Takes
Quick Clips: The Stock/Bond Correlation
Q2 2022
For the past two decades, the stock/bond correlation (SBC) has been consistently negative, and investors have been able to rely on their bond investments for portfolio protection when equities sell off. However, macroeconomic changes – like heightened inflation risk – could push this key asset allocation input into positive territory.
Journal Article
A Changing Stock-Bond Correlation
Q1 2023
For the past two decades, the stock/bond correlation – a fundamental detriment of risk in traditional portfolios – has been consistently negative. However, this hasn’t always been the case, and a positive stock/bond correlation could reappear due to macroeconomic changes. In this article, we assess the broad implications this would have for investors and set out practical steps to prepare for such an outcome.
Perspective
A Gut Punch
December 22, 2020
Sure, the last nearly three years have hurt, but at least the explanation was straightforward. A core part of our process, value, suffered. So when value rebounds, we will too, right? Well, not necessarily. To be clear, if value makes a prolonged major recovery, we certainly believe we will as well, but over short periods that doesn’t have to happen. Unfortunately, this is what we have experienced since the end of October. Regardless, it does not change my view one drop that going forward multi-factor investing is a darn good bet in a world that needs some darn good bets.
Perspective
There Is No Size Effect: Daily Edition
September 18, 2020
We have written several pieces on the famous small-firm or size effect, the two most important being our study of the interaction of size and quality and a fairly comprehensive survey of all things size. This note focuses on daily instead of the longer-horizon data studied in these other papers and, while not changing the overall story, this leads to a powerful illustration of what’s going on in small stocks.
Journal Article
Value and Interest Rates: Are Rates to Blame for Value’s Torments?
May 22, 2020
Some have blamed the interest rate environment for value stocks’ underperformance of growth stocks from 2017 to early 2020, as well as the stretch of lackluster performance for some value factors since Global Financial Crisis. We find the performance of value is not easily assessed based on the interest rate environment, and that factor timing strategies based on interest rate-related signals are likely to perform poorly.