Not every factor profits investors when implemented through a passive strategy. Size and quality show weak robustness, and liquidity-demanding factors, such as illiquidity and momentum, are associated with high trading costs. Investors may be better off accessing these factors through active management rather than indexation.
Contrary to the belief of many casual central bank watchers, there is a striking parallel between China’s quantitative easing and that of Japan, U.S. and Europe. Just as the Fed expands its balance sheet to bankroll the U.S. government, so does the Chinese central bank – through its state-owned banking satellites – expand its balance sheet to lend to SOEs to promote employment and growth.
Cornell and Hsu assert that the standard consumption-based model has failed to explain the cross-section of expected returns because its assumption that security prices are set by end investors, who wish to maximize their intertemporal consumption, is counterfactual.
Complexity can dampen investor understanding, leading to poor investment decision making and ultimately derailing long-term financial goals—yet the bias toward investment complexity persists, reinforced by explanations that are behavioral in nature.
NEWPORT BEACH, Calif.–(BUSINESS WIRE)–Research Affiliates today announced that Vice Chairman and Co-Founder, Dr. Jason Hsu, will lead Rayliant Global Advisors, an Asia-focused investment firm based in Hong Kong, as Chairman, CEO and majority owner. Research Affiliates will retain a substantial minority interest in Rayliant (formerly Research Affiliates Global Advisors, the East Asia unit of Research…
Substantial evidence supports cyclicality in factor returns. Evidence also indicates most investors don’t fully benefit from this insight due to behavioral biases—but contrarian investors do.
The rapid rise and sharp decline of the A-shares market represents a massive redistribution of wealth, especially painful to uninformed investors who bought hot stocks near the peak. What should the Chinese government do now?
Some of the investment industry’s best thinkers discussed their work at a Research Affiliates meeting. Jason Hsu’s report emphasizes that factor-based investing is incomplete unless it’s paired with an asset-based approach.
The excess return earned by the average investor in value mutual funds was meaningfully negative over a 23-year period when the funds themselves outperformed the market. Why don’t all value investors benefit from the value premium?
Beyond the debate over definitions, smart beta strategies can be the prime alternative to active management for our times just as cap-weighted index funds served so admirably in that role for the past four decades.