Category Archives: Fund management in general
Replacing market indices
If equity markets suddenly sprang into existence now, would we create market indices? I’m doubtful. Why an index? The Dow Jones Industrial Average was born in 1896. This was when computers were humans with adding machines (but they did do parallel processing). At that point boiling “the market” down to a single number had value. … Continue reading
The Battle of Fundamental Index
The pro and con of fundamental indexing. Last Tuesday the London Quant Group sponsored a boxing match between forces for and against fundamental indexing. Adam Olive was in the pro corner. Ed Fishwick was in the con corner. Round 1: FI comes out swinging Fundamental indexing is an alternative to market capitalization indexing. The optimal … Continue reading
What does ‘passive investing’ really mean?
We know the words but what do they mean? Some definitions Here are some definitions of “passive investment management”. Investopedia says: A style of management associated with mutual and exchange-traded funds (ETF) where a fund’s portfolio mirrors a market index. Wikipedia says: Passive management (also called passive investing) is a financial strategy in which an investor (or … Continue reading
Positional stocks
Conspicuous consumption — buying what others can’t afford — is a disequilibriating force. Prices get raised and supply is limited. The goods that are conspicuously consumed are positional goods. A similar phenomenon occurs in the stock market. AAPL currently seems to fit the mold. Fashion changes. I don’t much believe in predictions, but I predict … Continue reading
Lessons from warblers and sticklebacks
Falkenblog has a post on ecological studies of animal intelligence. The entire post is interesting, but I particularly like his last sentence: [I]f you think that because you have a really high IQ, are really rich, or are a good speaker, you are therefore the smartest guy in any room, you are going to make … Continue reading
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The carry trade — almost wordless
The idea Borrow in a currency with low interest rates, lend in a currency with high interest rates. The image Photo by Patti via stock.xchng The question Am I wrong? Subscribe to the Portfolio Probe blog by Email
Review of “Saving Capitalism from Short-Termism” by Alfred Rappaport
Several practical steps. Executive summary A great goal, but can it deliver? I was skeptical. However, I’ve been won over — the book proposes several specific actions that are feasible and powerful. Culprits of the crisis The book starts with an accounting of the culprits who caused the financial crisis of 2007-20??. Pretty much everyone, … Continue reading
Posted in Book review, Fund management in general
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Risk parity
Some thoughts and resources regarding a popular fund management buzzword. The idea Given asset categories (like stocks, bonds and commodities) create a portfolio where each category contributes equally to the portfolio variance. Two operations There are two cases in creating a risk parity portfolio: the universe is the asset categories the universe is the assets … Continue reading
Posted in Fund management in general, Quant finance, R language
Tagged equal risk contribution, risk parity
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A call for unfunded pensions
Con Keating gave a talk Wednesday in which he called for pensions to be unfunded, but insured. Key points Pooling is efficient We are definitely rich enough to afford pensions A pension is deferred compensation If pensions are unfunded, then insurance is needed Pooling Individual savings for retirement must be large enough to cover the … Continue reading
Some papers on low volatility investing
Abnormal Returns points to The Capital Spectator piece Volatility & Portfolio Management research review. This has links to 5 relatively recent papers related to volatility. Previous posts here on this topic can be found at the low volatility investing tag. Subscribe to the Portfolio Probe blog by Email
