The Most Hated (And Most Loved) Investing Factor

By Jack M. Forehand (@practicalquant)  —  Factor investing requires a lot of patience. Despite the fact that research shows that many factors can produce outperformance over long periods of time, all of them will struggle at times in the short-term. And those struggles are typically long and difficult enough that most investors will abandon underperforming strategies in favor of what is working now. When that happens, that typically signals a bottom for the factor is near. At Validea, we track several hundred factors in our guru-based models that run the gamut from value to growth to momentum. Our historical testing […]

Most Read Posts on Validea’s Guru Investor

Below are links to our most popular posts for this week on Validea’s Guru Investor blog. [1]  The Most Hated (And Most Loved) Investing Factor [2] The Biggest Failure of the Investment Management Industry [3] The Active Versus Passive Debate is Not Binary [4] Cliff Asness Says Stocks and Bonds Will Return only 2% ——- Photo: Copyright: arcady31 / 123RF Stock Photo  

This Bull Market Isn’t Happy

The current bull market’s backdrop of low volatility, high valuations, and tightening monetary policy are worrisome factors for some in the investment community, according to a recent article in The New York Times. Jim Paulsen, a market strategist for the Leuthold Group, describes the above factors as “scary,” adding that most questions he hears from clients and audiences at speaking engagements relate to what he believes will finally trigger a major correction. “No one ever asks me when the S&P is going to blow past 3,000,” says Paulsen. The article also cites comments by UBS chief investment officer Mark Haefele, […]

Zweig on Buffett and Bitcoin

Author and columnist Jason Zweig says that successful investors–such as Warren Buffett and Charlie Munger–can set aside emotions, according to a recent CNBC article. At the recent Evidence-Based Investing conference in New York, Zweig mentioned Berkshire Hathaway’s Buffett and Munger as among the top tier, adding that they are “inversely emotional and are able to turn emotions inside out,” and “acutely sensitive to the fear inside other people” which they then take advantage of. With regard to investing in cryptocurrencies, Zweig advised, “Make sure you look first at an exit strategy before investing,” and said that investors should have a […]

Hulbert: Large Caps Now and Small Caps in January

Small-cap stocks outperform large caps, on average, over the long term, but almost all the small-cap advantage occurs in the early part of the year. This according to a recent MarketWatch article by Mark Hulbert. “As you can see from the chart below,” he writes, “their advantage gradually diminishes as the year progresses, and is actually negative by the last quarter of the year.” The widely-accepted theory on the relative performance of these two asset classes, says Hulbert, is that the small-cap advantage represents compensation for higher risk. However, he adds, a study published more than ten years ago traces […]

Cliff Asness Says Stocks and Bonds Will Return only 2%

At the 2nd annual Evidence-Based Investing Conference earlier this month, AQR’s Cliff Asness shared his view that the expensive financial markets will offer weaker returns going forward. This according to a recent CNBC article. According to the article, Asness predicts that investors with a “balanced portfolio of stocks and bonds will only generate 2 percent real annual returns,” but warned against betting against the market. He argues that strong evidence exists indicating that high CAPE (cyclically adjusted price-earnings) ratios will translate into lower returns for the next ten years. “Don’t market time with this,” Asness said, adding, “Valuation of markets […]