Momentum: the most powerful factor

Today I want to talk about momentum. I’m always struck by the hand wringing I see from investors as prices reach new highs. This seems particularly evident over the last year during a great run for stocks. This is odd when you look at the historical evidence for momentum. Momentum is the most powerful factor in investing by a significant…

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Quant strategies: Q3 2017 YTD performance update

Q3 2017 is now behind us. Time to update some performance numbers. In this post I update the quant portfolio performance stats for through Q3 2017. Below are the 2017 YTD total return (through Sep 30, 2017) and max drawdown numbers for the various quant strategies I track. For explanations of the various quant strategies see the portfolios page. All equity portfolios…

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Quant investing: the profitability factor

What would you think of a quant strategy that only invests in the most profitable companies? Would it under perform the market or beat the market? If you’re an efficient market person you may think that higher profitability must be priced into equities and therefore at best the strategy would match the market. Not so. Turns out that profitability is…

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Quant investing: making momentum tolerable

For today’ s post and the next few I’ll be going back to my favorite topic, quant investing. In this post I want to explore pure momentum quant portfolios and in particular ways to make pure momentum investing tolerable and implementable to more investors. Note: for a refresher on momentum and its power (arguably the most powerful factor in investing) see…

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Using economic indicators to time the market

If you pay attention to the financial market news you may have noticed a lot of attention being focused on the slowing US/Global economy and the implications it has for financial markets. Just do a search on ‘slowing global PMI’ and watch the hours waste away. Basically, the US/Global economy is slowing which means recession is right around the corner…

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Tactical asset allocation – october 2015 update

A lot of volatility this month in the equity markets. So far it looks like the portfolio signals to go to cash have been valid. Of course, that’s only half the battle. We’ll see what October brings, a historically positive month for equities. Here are the tactical asset allocation updates for October 2015. All portfolio updates are online as part of Paul’s GTAA 13…

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When quant portfolios underperform

Any investment strategy that is not ‘the market’ will experience periods of under performance. Sometimes quite extended like value investing in the late 90s. How an investor handles those periods of underperformance goes a long way to determining whether they have any chance of outperforming the averages over time. In today’s post I want to highlight the recent under performance…

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What to do about poor future returns

There’s been a lot of chatter recently about asset valuations, in particular US stocks and US bonds, and their impact of future returns. This is nothing new. It just seems to get louder at the start of every new year. I’ve discussed this topic before on the blog. Last time here. Basically, my point was that we may indeed, in…

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Increasing returns, lowering risk in GTAA portfolios

Warning. This post is kind of a finance geek out. I’ll try and keep it as basic as possible but I apologize in advance if I cause any heads to hit the keyboard… In this post I’ll take a look at impact and potential benefits of adding volatility weighting and mean-variance optimization to tactical asset allocation portfolios similar to the…

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A trend following bond portfolio for any environment

Interest rates are going up. Interest rates are going down. The 30 year bull market in bonds is coming to an end. The FED cannot afford to raise rates significantly without killing the economy. Bonds will have negative real returns going forward. We’re in the biggest bond bubble of all time. Bonds are still the best diversifier of equity risk.…

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