Value Investing Trends

A recent Morningstar article addresses the persistent lackluster performance of value stocks and whether it is a temporary situation or something more permanent. According to participants in this year’s Morningstar ETF Conference, the article reports, “it’s never easy to be a value investor,” and “value stocks today are behaving just as they should.” John West, managing director at Research Affiliates, shared his view that, “The world is unfolding exactly as it should,” underscoring that most investing styles go through long periods of underperformance. Wes Gray, CEO of Alpha Architect, noted, “Buying cheap stuff that stinks can be the best investment […]

Factor Investing Can Keep Active Management Relevant

Despite its recent troubles, active management remains relevant, but its future “lies in low expenses that allow investors to enjoy a comfortable share of returns,” according to a recent article posted on ETF.com. The article cites comments by Tom Rampulla, managing director of Vanguard Financial Advisor Service, who argues that active managers have to employ factor and smart-beta investing, referred to as an “evolutionary stage of active” that can “benefit client portfolios.” According to Rampulla, active management “simply costs too much,” and he argues that the underperformance of such managers is worsening, exacerbated by the glut of investment professionals in […]

Ritholtz Says Stock-Picking is Still Alive if Not Kicking

Active fund management has been losing followers but isn’t going away entirely, writes Barry Ritholtz in a recent Bloomberg article. While stock-picking has seen a host of changes, he offers several insights as to “how we got here” including the following: Beating the market is tougher than most people thought, a notion that Ritholtz says has become “widely accepted among both professional investors and individuals.” We have a much greater understanding of investor psychology, and this “makes the case for low-cost index investing even more compelling.” Quantitative studies, writes Ritholtz, suggest that much of active investing performance is attributable to […]

James O’Shaughnessy: Knee-Jerk Investing Doesn’t Work

A quantitative investing guru who uses concrete metrics to analyze stocks, James O’Shaughnessy believes that investors get in the way of their own success by reacting emotionally, writes Validea CEO John Reese in this week’s Forbes. The article outlines O’Shaughnessy’s investment philosophy that, to outperform the market, an investor must choose a strategy and “stick to it, no matter what” as well as his belief that most investors lack the mindset that allows them to be successful. Reese explains O’Shaughnessy’s argument that when an investor chooses an active manager, it is essential to understand the underlying stock-picking process and avoid […]

Asness versus Arnott: The Factor Timing Debate Continues

AQR Management founder Cliff Asness continues to argue that factor timing is “deceptively difficult,” contrary to what Rob Arnott of Research Affiliates would have you believe, says a recent article in Institutional Investor. Asness’ issue, the article says, is with Arnott’s contention that risk premia factors such as value, momentum, growth and volatility have become “overvalued as a result of the rising popularity of smart beta and factor investing strategies” and that investors should “time their exposures to buy low and sell high.” Asness, on the other hand, argues that “diversification, not timing, is the best way to achieve returns […]