Hard to Time Outperformance

Larry Swedroe correctly notes that, while the markets may not be perfectly efficient, they’re efficient in the only way that matters: “There are fewer active managers that outperform appropriate risk-adjusted benchmarks, after expenses, than would be randomly expected. In addition, there’s little to no evidence of persistence of performance beyond the randomly expected.” Read the Read more about Hard to Time Outperformance[…]

Smart Beta & Tourist Investors

Rick Ferri correctly notes:  “The latest spin to attract tourist money is “smart beta.” The phrase didn’t exist one year ago, yet a Google search today shows 190,000 results. The inference that investing this way is smart has ignited a strong interest among less-sophisticated investors while those who truly understand what’s behind these strategies find Read more about Smart Beta & Tourist Investors[…]

Sweeping Changes Underway at DFA

“Despite it’s success, the firm is tinkering with the way it builds equity portfolios” By Jason Kephart via Investment News

For the first time in more than 20 years, Dimensional Fund Advisors is changing the way it builds equity portfolios. Thanks to a breakthrough in asset-pricing research last year, DFA is adding a third layer of screening to its equity portfolios, which already tilt toward small and value stocks. The new layer, or dimension, focuses on a company’s persistence of profitability — basically a stock’s ability to earn a profit consistently.

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The Profitability Factor

Phil DeMuth discusses a possible breakthrough for factor-based investors known as “Profitability”. “Over time, tilts towards value, momentum and profitability have outperformed the market, and due to the diversification benefits, a combined portfolio of these three has provided much higher reward per unit of risk and a significant reduction in extreme risk or losses. Thus, Read more about The Profitability Factor[…]