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 the asset class offers “an unusual three-way combination of low valuations, depressed currencies and strong momentum.” Here’s how: Low valuations: Arnott uses the Shiller PE ratio (which uses 10-year historical inflation-adjusted earnings) as a basis for his argument and says that, by that measure, emerging […]

Waiting to Exhale: What Lies Ahead After the Brexit Vote?

“The healthy economy is one that makes its own decisions,” says Rob Arnott of Research Affiliates concerning possible fallout from Britain’s vote to stay or leave the European Union. In a recent CNBC interview, Arnott shared his views on the concern around Thursday’s result and how it will impact the markets. According to Arnott, the “fear mongering” around the vote is “a little over the top.” He says, “Roll the clock forward ten years. Is Europe still going to be trading with the U.K.? Of course they will. Will it be materially different from today? Of course not.” That said, […]

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 at AQR, “Timing the market is hard and we call it a sin, but we recommend that investors sin a little.” The panelists discussed the pros and cons of smart beta strategies, generally agreeing on most points. “The point of our whole exercise is check […]

Are Formula-based Investment Strategies Necessarily “Smart”?

The word “smart” is thrown around a lot these days to describe phones, tables, and a host of other gadgets intended to make our life easier.  But, as we know, the mere existence of capabilities doesn’t necessarily mean those capabilities work well. Rob Arnott, founder of Research Affiliates, discussed this as it relates to the “smart beta” investment strategy. “Smart beta” describes a portfolio-building strategy that focuses on a company’s fundamentals (such as revenue, book value and cash flow) exclusive of its market capitalization. Arnott asserts that because the methodology is applied doesn’t ensure it will be successful. Like all […]

Time to Bottom Feed Across the Pond

The U.S. stock market is expensive and bond yields aren’t far from record lows. European and emerging market stocks, on the other hand, have approached stomach-turning status, says Jason Zweig of the Wall Street Journal. The European market has dropped by 12% while emerging markets have plummeted by 21.8%. Stabilized oil prices and a possible interest rate hike by the Fed has lifted investors’ outlook on these markets by a marginal 2% to 3%, but the fact remains that overseas stocks are cheap. In fact, according to data from MSCI, as of April 30th the average price-to-book value of European […]