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  1. There is an adage on Wall Street that comes around every January. And every January, we debunk it.  In As Goes January, So Goes the Year, we remind readers that while the performance of markets in January will, by definition, influence the total return of the year, the returns in January say nothing about market returns in February through December.
  1. While the Fed didn’t raise rates until the end of the year, it was a topic of frequent discussion. In Duration Management May Not Be Enough we took a look at historical rising rate environments – like those of 1993, 1998, and 2004 – and demonstrate that simply moving to a lower duration may not necessarily be safer.  How the yield curve ultimately evolves during the rising rate environment – the overall level, slope, and curvature – will ultimately dictate what points are safe and which aren’t.  Simply moving to lower duration levels, however, is akin to moving entirely to the utilities sector because it has a lower market beta: just because you are swapping broad market risk for idiosyncratic risk does not mean your portfolio is any less risky.
  1. With the popularity of smart beta offerings continuing to grow, in Sectors vs Factors or Factors in Your Sectors we took a look at different equity sectors and statistically identified their betas to different market risk factors.
  1. With U.S. equities at historically expensive levels and U.S. Treasury yields near long-term lows, the outlook for most moderate portfolio returns over the next decade is anemic at best. We outline this depressing argument in The 60/40 Forecast: 0% Through 2025.
  1. Behavior plays a critical role in investing. In Checking your portfolio more frequently ensures you see more losses, we show that if an investor checks his portfolio daily, there is a 49% chance of seeing a negative return, whereas if he checks it annually, there is less than a 30% chance.  Since investors feel losses twice as much as they feel gains, checking their portfolio more frequently will cause them to believe markets are riskier than they really are.  The fact that the perception of riskiness seems to increase with the frequency of portfolio evaluation is known as myopic loss aversion.BONUS: Similarly, for advisors selecting managers, we wrote about how investors do not experience summary statistics.  This is important, as often portfolios are selected based on long-term investment statistics, but are experienced on a day-to-day basis.
  1. In Volatility: Good, Bad, or Indifferent we had a conversation with ourselves about the curious object that is volatility. We discuss how the statistical definition differs from the connotation of the word, how more volatility does not necessarily mean more risk, how higher volatility does not necessarily mean higher return, and how depending on your investment horizon, a more volatile asset class may be safer than a less volatile one.
  1. As markets tumbled in August, in Let’s Talk “Year-to-Date” we wrote about how measuring performance based on year-to-date performance can be entirely misleading, if not downright dangerous. Despite rolling performance numbers over every January, the investing game actually has a running score.  Using year-to-date returns as a yardstick for performance can lead investors to fall prey to the house money effect, a topic we wrote about for Forbes.com in Investors Beware the House Money Effect.
  1. Humans love a good narrative – especially a single, unifying theory like “price contains all relevant information.” In Price is a liar we reflect upon how day-to-day price changes in markets can occur for a variety of reasons, many of which have absolutely nothing to do with the re-valuation of securities.  The boring answer is that price simply represents the equilibrium of buying and selling pressures.  However, knowing that humans are spectacularly bad at discounting true, secular changes and extrapolating non-linear relationships, lying prices may be an opportunity for objective investors.
  1. There are important lessons that we can learn looking at markets outside the U.S. In Rates fell, so why did Canadian preferreds lose 20%? we explore the confusing case of Canadian preferreds in 2015.  While the Bank of Canada cut rates twice in the year, preferreds lost 20% of their value.  While many would expect preferreds to rally, the proliferation of “rate reset” preferreds and the unfortunate timing of the rate cuts caused a huge portion of the market to reset to lower dividend payouts, destroying their value.
  1. Reflecting on the poor outlook for a typical balanced portfolio in the next decade, we asked how higher yielding asset classes – like high yield, bank loans, emerging market debt, and REITs – can help bridge our growth gap in When can income be growth?
  1. Finally, in Risk cannot be destroyed, we explored how different risk management techniques do not destroy risk, but rather simply trade off which risks investors are embracing. Diversification helps mitigate idiosyncratic risk, but takes on crashing correlation risk in crises.  Increased allocations to fixed income helps mitigate the risk of significant capital loss, but takes on opportunity risk.  Similarly, a momentum-based tactical strategy can help mitigate negative momentum risk, but increases exposure to whipsaw risk.  While risk cannot be destroyed, balancing risk management techniques can help mitigate exposure to a given single risk.

Corey is co-founder and Chief Investment Officer of Newfound Research, a quantitative asset manager offering a suite of separately managed accounts and mutual funds. At Newfound, Corey is responsible for portfolio management, investment research, strategy development, and communication of the firm’s views to clients.

Prior to offering asset management services, Newfound licensed research from the quantitative investment models developed by Corey. At peak, this research helped steer the tactical allocation decisions for upwards of $10bn.

Corey is a frequent speaker on industry panels and contributes to ETF.com, ETF Trends, and Forbes.com’s Great Speculations blog. He was named a 2014 ETF All Star by ETF.com.

Corey holds a Master of Science in Computational Finance from Carnegie Mellon University and a Bachelor of Science in Computer Science, cum laude, from Cornell University.

You can connect with Corey on LinkedIn or Twitter.

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