Machine Learning, Subset Resampling, and Portfolio Optimization
We two novel algorithms, one based on machine learning and the other based on simulation, to manage estimation risk in portfolio optimization.
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On Performance Commentary
Ex-post performance commentary is meaningless without ex-ante expectations. With appropriately set expectations, step-wise decomposition can be insightful.
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The New Glide Path
Investors have traditionally utilized a stock/bond glide path in order to control for sequence risk. Where does trend following fit in?
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The Raw Materials for Active Management
Explaining why active management performs a certain way in an environment is tough. Predicting this difference is even harder. Diversification is key.
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Separating Ingredients and Recipe in Factor Investing
Factor portfolio construction has two key elements: ingredients (the signals used to pick investments) and recipe (the rules used to translate those signals into allocations). While the ingredients often get the most focus, the recipe can have just as large of an impact on returns.
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The Diversification Dangers of DIY Tactical
While DIY Tactical ETF strategies became popular after 2008, we often see implementations that fail to adequately diversify. We outline three ways in which we see this manifest: a failure to diversify what, how, and when.
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RIP XIV
From inception through 12/31/2017, XIV earned over 40% annualized per year since inception. It then lost over 90% of its value in two days. Was XIV an example of Taleb's Turkey or is there a deeper lesson to be learned?
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Three ETF-Based Ways to Leverage Your 60/40 Without Margin
We explore three ETF-Based ways to leverage your 60/40 without margin. We explore high beta ETFs, levered ETFs, and derivative-based ETNs as potential tools and look at the benefits and risks of each approach.
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Factor Investing & The Bets You Didn’t Mean to Make
Factor-based investment strategies seek to manage risk with diversification; completely unconstrained, however, they can be overwhelmed by unintended bets.
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Levered ETFs for the Long Run?
Levered ETFs are often dismissed as not suitable for buy-and-hold investors, but they may be able to play a role in creating risk-efficient portfolios.
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No Silver Bullets: 8 Ideas for Financial Planning in a Low-Return Environment
We offer 8 ideas investors can implement to help address the short-coming of traditional financial planning rules in a low-return environment.
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Portable Beta: Making the Most of the Returns You’re Already Getting
In theory, investors should gear the most risk-efficient portfolio; in practice, few do. Portable beta may help investors create more efficient portfolios.
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Risk Parity: How Much Data Should We Use When Estimating Volatilities and Correlations?
We explore whether more sensitive volatility estimates (less data) or more stable volatility estimates (more data) produce better risk parity results.
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A Case Against Overweighting International Equity
Are relative valuations a good enough reason to overweight international equity exposure compared to U.S. equity exposure?
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It’s Long/Short Portfolios All The Way Down
Long/short portfolios can provide us with a unique framework to think about portfolio differences, and a unique way to quantify value-add for fees paid.
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The Lie of Averages
We believe that maintaining a degree of flexibility within a portfolio can help investors adapt to the path they are on.
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Tax-Managed Models & Asset Location
We explore how tax-adjusted expected returns can be created and used in effort to create tax-managed portfolios that can maximize post-tax returns.
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Portfolios in Wonderland & The Weird Portfolio
Investors looking for long-term success may have to expand their investment palette and invest in weird portfolios to earn enticing returns in the future.
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Accounting for Autocorrelation in Assessing Drawdown Risk
Volatility can predict drawdowns, but incorporating autocorrelation yields more accurate predictions in equities, low vol, income, and managed futures.
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A Gentle Guide to Global Tactical Asset Allocation
An introduction to global tactical asset allocation ("GTAA") using systematic styles like value, momentum, carry, defensive and trend.
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