Index Fund Pioneer Warming to Computer-Generated Trading

Princeton economics professor Burton Malkiel, who started the first passive index fund for Vanguard in 1976, has experienced a “remarkable change of heart,” according to a recent article in the New York Times. Referencing Malkiel’s revolutionary notion that dart-throwing monkeys could pick winning stocks as well as market “experts,” the article says the “index-fund evangelist” […]

Rob Arnott Says U.S. Stock Valuations Are a Worry

Rob Arnott, founder and CEO of Research Affiliates, says investors should “avoid U.S. stocks and buy emerging market equities to outperform in the coming years,” according to a recent CNBC interview. Arnott was a pioneer in developing indexing strategies that weight portfolio holdings according to valuation measures rather than market capitalization (a strategy typically used […]

The Math of Stock Picking Works Against Active Managers

The concentration of gains in a minority of index fund holdings—a statistical concept called positive skew—makes it extremely difficult for active managers to beat benchmarks, according to a recent Bloomberg article. Research conducted in 2015 found that “the distribution of returns in the stock market is bizarrely lopsided,” the article argues. “It’s a pattern of returns that […]

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 […]

Rob Arnott Says Clock is Ticking on Smart Beta ETFs

A smart-beta pioneer, Rob Arnott of Research Affiliates warns that these investment vehicles are in a bubble, says an article in last week’s Bloomberg. Smart-beta ETFs organize securities based on quantitative factors like volatility or “cheapness”, and the article explains that Arnott’s position is nothing new (he publicly battled with Cliff Asness on the topic […]

Arnott: Emerging Markets Hold Promise

Although EM stocks have taken a beating in recent years, things may be looking up, writes Validea CEO John Reese in this week’s TheStreet. Reese offers insight from Research Affiliate’s Rob Arnott, who thinks that, notwithstanding swelled valuations (based on Shiller PE ratios), “emerging-market stocks offer an attractive combination of depressed currencies, low valuations and […]

Rob Arnott is Pro-Emerging Market Investment

Countries don’t have to be great to see significant market growth, according to Research Affiliates’ CEO Rob Arnott as explained in a recent Investment News article. In fact, the article says, since Arnott first recommended emerging markets in January, the “average diversified markets fund has gained 7.8%, and 17.8% since the February low.” He believes […]

Asness and Arnott Talk Market Timing, Smart Beta and Behavioral Biases

Maybe not always. At least that was the upshot of a debate between Cliff Asness of AQR and Rob Arnott of Research Affiliates, panelists at the recent Morningstar conference in Chicago. Although they debated various topics, they seemed to agree that value stocks deserve attention when they’re cheap. According to Asness, founder and managing principal […]

Four Conditions Reminiscent of 1999

Rob Arnott, founder and chairman of Research Affiliates, says that the recent market environment is reminiscent of 1999, just before the tech bubble burst. Writing in Barron’s, Arnott argues that the following four “conditions parallel the extremes of the late 1990s:” “Falling inflation expectations,” which Arnott argues “snap back in reasonably short order.” He observes […]

Asness vs. Arnott on Smart Beta, Factor Timing, and Performance Chasing

Cliff Asness, co-founder of AQR Capital Management, added fuel to the debate over “smart beta” investing with a recent paper attacking arguments made by Rob Arnott of Research Affiliates. Arnott, once understood as a proponent of smart beta approaches due to his research and development of fundamental indexing, claimed that many smart beta exchange traded […]

Diversification & Rock Bottom Valuations In the Third Pillar

Rob Arnott and Christopher Brightman of Research Affiliates recently discussed the allocation and performance of PIMCO All Asset Fund, which goes outside mainstream investments into what they describe as the Third Pillar. Arnott explains that a three-year bear market in Third Pillar investments has impacted investors’ outcomes and outlooks. Although the fund’s 7% loss from […]