Tag Archives: momentum

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 this great paper from AQR.  You may have noticed that none of the quant portfolios that I have presented on the blog are pure momentum strategies. Only two strategies, trending value and microcap trending value, use momentum to picks stocks … Continue reading

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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 which means financial markets will tank. That seems to be the predominant bear case now, or one of the many. There is some merit to this argument. The worst market downturns occur during recessions. The trick is that you need … Continue reading

Posted in TAA Investing | Tagged , , , , | 18 Comments

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 Portfolio New sheet. First, for the basic portfolios – the GTAA5 and the Permanent Portfolio. GTAA5 is now 20% invested with IEF going to invested this month. For the timing version of the Permanent Portfolio there were no changes this month. Now for … Continue reading

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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 of one the best performing quant strategy from What Works on Wall Street. In my first post on quantitative investing I introduced the top quantitative investing strategies as presented in the book What Works on Wall Street by O’Shaughnessy. I focused … Continue reading

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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 fact it’s probable, be facing poor future returns – a least for the next 10 years, but that doesn’t mean that the 4% SWR rule is dead. In fact the 4% SWR implies even worse returns than people are forecasting … Continue reading

Posted in Portfolio, Retirement, TAA Investing | Tagged , , , , , , , , , , , | 10 Comments

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 IVY (GTAA) portfolios I discuss frequently on the blog. Most of the data and theory I present here comes from this great paper on Adaptive Asset Allocation. If you have any interest in applying the concepts here to your portfolio … Continue reading

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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. Have you heard any of these lately? How about over the last few years? Probably incessantly. There seems to be more hand wringing and fretting over the future of bonds than even equities. And that is saying something. We could … Continue reading

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Quantitative Investing – Trending Value Strategy

Time to move on to the next quant strategy I want to highlight. This post will cover a strategy called Trending Value, aka the value stocks on the mend strategy. This strategy is the top ranked strategy by risk adjusted return (sharpe ratio) in the book What Works On Wall Street. This strategy shows the power of combining the three market factors that have been proven to outperform over time; size, value, and momentum. Actually you get two strategies out of this one since you start out with a powerful value screen. With the basics we learned in the previous … Continue reading

Posted in Portfolio, Quant Investing | Tagged , , , , | 59 Comments

Introduction To Quantitative Investing

What if I could introduce you to an investment style for equities that can soundly beat the market over time and only requires a few days a year of work? Interested? I thought so. Today I want to introduce you to Quantitative Investing and why you should consider incorporating it into your investment portfolio. Quantitative Investing is a fancy term for systematic, structured investing that automates buy and sell decisions. It represents a combination of passive and active investing. Other terms for it are automatic investing or computerized investing. Many investors are familiar with some very infamous stories of quantitative investing gone … Continue reading

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Beating the market to maximize retirement income – part II

A while back I wrote about some historical analysis I had done that showed several ways that an investor could achieve market beating returns and thus maximize retirement income. It has been known for a long time that several ‘factors’ or characteristics of stocks generate market beating returns. The two classic factors are value and size. Value stocks outperform the market over long periods of time. Small cap stocks outperform as well. The third and newest factor, at least relative to value and size, is momentum. I also showed that contrary to efficient market theory these extra returns do not … Continue reading

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