Journal ArticleDOI
How Can 'Smart Beta' Go Horribly Wrong?
TLDR
In this article, the authors predict a smart beta crash as a consequence of the soaring popularity of factor-tilt strategies, and the reasonable probability of such a crash is shown.Abstract:
Factor returns, net of changes in valuation levels, are much lower than recent performance suggests. Value-add can be structural, and thus reliably repeatable, or situational—a product of rising valuations—likely neither sustainable nor repeatable. Many investors are performance chasers who in pushing prices higher create valuation levels that inflate past performance, reduce potential future performance, and amplify the risk of mean reversion to historical valuation norms. We foresee the reasonable probability of a smart beta crash as a consequence of the soaring popularity of factor-tilt strategies.read more
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Forecasting: theory and practice
Fotios Petropoulos,Daniele Apiletti,Vassilios Assimakopoulos,Mohamed Zied Babai,Devon K. Barrow,Souhaib Ben Taieb,Christoph Bergmeir,Ricardo J. Bessa,Jakub Bijak,John E. Boylan,Jethro Browell,Claudio Carnevale,Jennifer L. Castle,Pasquale Cirillo,Michael P. Clements,Clara Cordeiro,Clara Cordeiro,Fernando Luiz Cyrino Oliveira,Shari De Baets,Alexander Dokumentov,Joanne Ellison,Piotr Fiszeder,Philip Hans Franses,David T. Frazier,Michael Gilliland,M. Sinan Gönül,Paul Goodwin,Luigi Grossi,Yael Grushka-Cockayne,Mariangela Guidolin,Massimo Guidolin,Ulrich Gunter,Xiaojia Guo,Renato Guseo,Nigel Harvey,David F. Hendry,Ross Hollyman,Tim Januschowski,Jooyoung Jeon,Victor Richmond R. Jose,Yanfei Kang,Anne B. Koehler,Stephan Kolassa,Nikolaos Kourentzes,Nikolaos Kourentzes,Sonia Leva,Feng Li,Konstantia Litsiou,Spyros Makridakis,Gael M. Martin,Andrew B. Martinez,Andrew B. Martinez,Sheik Meeran,Theodore Modis,Konstantinos Nikolopoulos,Dilek Önkal,Alessia Paccagnini,Alessia Paccagnini,Anastasios Panagiotelis,Ioannis P. Panapakidis,Jose M. Pavía,Manuela Pedio,Manuela Pedio,Diego J. Pedregal,Pierre Pinson,Patrícia Ramos,David E. Rapach,J. James Reade,Bahman Rostami-Tabar,Michał Rubaszek,Georgios Sermpinis,Han Lin Shang,Evangelos Spiliotis,Aris A. Syntetos,Priyanga Dilini Talagala,Thiyanga S. Talagala,Len Tashman,Dimitrios D. Thomakos,Thordis L. Thorarinsdottir,Ezio Todini,Juan Ramón Trapero Arenas,Xiaoqian Wang,Robert L. Winkler,Alisa Yusupova,Florian Ziel +84 more
TL;DR: A non-systematic review of the theory and the practice of forecasting, offering a wide range of theoretical, state-of-the-art models, methods, principles, and approaches to prepare, produce, organise, and evaluate forecasts.
Journal ArticleDOI
Factor-Based Investing: The Long-Term Evidence
TL;DR: In this article, the authors estimate the risk premiums earned from factor investing over very long periods (up to 117 years) and across many markets ( up to 23) and report on the long-term profitability of following strategies based on market capitalization, value versus growth, dividend yield, stock-return momentum, and low-volatility investing.
Journal ArticleDOI
The Siren Song of Factor Timing
TL;DR: In this paper, the authors argue that factor timing has the potential of reintroducing a type of skill-based "active management" (as timing is generally thought of this way) back into the equation.
Journal ArticleDOI
Factor Timing with Cross-Sectional and Time-Series Predictors
TL;DR: In this article, the authors search for predictors of value, size, momentum, quality, and minimum-volatility smart beta factors under different economic regimes and market conditions, and find that combining information from several predictors such as business cycle indicators, valuation, relative strength, and dispersion metrics is more effective than using individual predictors.
Journal ArticleDOI
INVITED EDITORIAL COMMENT: The Siren Song of Factor Timing aka “Smart Beta Timing” aka “Style Timing”
TL;DR: Asness and Asness as discussed by the authors proposed a set of factors that both explain security returns and deliver a positive return premium (not necessarily the same things), and the spread between the factors is defined as the difference between the two factors.
References
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Journal ArticleDOI
The Profitability Of The U.S. Food Supply Chain: Financial Indicators, Cross-Section And Time-Series Effects
TL;DR: In this paper, the authors examined the U.S. agribusiness profitability from 1986 to 2008 by using regression analysis and modeling accounting returns as a function of diverse financial indicators.
Journal ArticleDOI
The Surprising 'Alpha' from Malkiel's Monkey and Upside-Down Strategies
Are Stocks Overvalued? A Survey of Equity Valuation Models
TL;DR: The question "Are stocks overvalued?" is ever present in the minds of both investors and investment professionals as mentioned in this paper, and it should come as no surprise in one of the longest-running bull markets in U.S. history.