Research makes a compelling case that investors should rebalance their portfolios, yet most investors do not do so. Why not? The answer is less about “behavioral mistakes” and more about the fact that “rational” individuals care more about other things than simply maximizing investment returns.
Numerous studies show that most active managers fail to deliver “alpha” over time net of fees. And yet investors continue to pay high fees for active management. This article asks why investors persist in such seemingly irrational behavior. As long as active managers can keep on charging high fees, they will do so. It is time for investors to examine how much they are willing to pay for an elusive risk premium.
With U.S. government debt equal to 100% of GDP, should investors be concerned? What specifically makes high government debt-to-GDP bad? How much is “too much”? Does it matter whether the debtholders are domestic buyers or foreign buyers?
There is an alternative to traditional passive and active equity allocations—“alternative” beta” or “strategy index” options. Our research on this subject compares seven leading alternative beta strategies. The results—originally published in the Financial Analysts Journal–may surprise you.
In this article, the authors conduct a horse race between representative risk parity portfolios and other asset allocation strategies, including equal weighting, minimum variance, mean–variance optimization, and the classic 60/40 equity/bond portfolio. They find that the traditional risk parity portfolio construction does not consistently outperform (in terms of risk-adjusted return) equal weighting or a model…
Classical performance attribution methods do not explicitly assess managers’ dynamic allocation skill in the factor domain. The authors propose a generalized framework for performance attribution that decomposes the allocation effect into value added from both static and dynamic factor exposures and thus yields additional insight into sources of manager alpha To learn more, read the…
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