Asset Allocation
Diversifiers Forever
July 31, 2025
In a portfolio whose investment horizon is forever, do diversifying investments add any value? In this short paper, we illustrate the surprising power of diversification for ultra-long-term investors.
Equities
Equity Market Focus: Objective Expected Returns
July 31, 2025
This paper reviews the strengths and weaknesses of using valuation-based metrics like CAPE and CAEY to estimate long-run equity market returns. While these models remain the most robust objective tools available, their predictive power is nuanced and often overstated.
Equities
Equity Market Focus: Interrogating the Historical Data
July 10, 2025
We discuss how historical average returns can be useful estimates of future expected returns (only) if expected returns are constant and the sample is unbiased.
Alternative Investing
How Did We Get Here? A Brief History of Expected Returns Formation
June 20, 2025
We present our history of expectation formation: How have investors formed long-run return expectations over time, and how have academics perceived that investors do it, or ought to do it?
Equities
Why Are Bond Investors Contrarian While Equity Investors Extrapolate?
May 27, 2025
This article explores the contrast in how investors form long-run expectations in equity and bond markets. It also examines very long run trends in financial market variables and potential implications for the future.
Alternative Investing
Exceptional Expectations: U.S. vs. Non-U.S. Equities
May 9, 2025
We analyze the persistent outperformance of US equities compared to non-US equities, focusing on the drivers of relative performance, including fundamentals and valuations. We examine historical data, valuation trends, and the implications for future returns, highlighting the potential for mean reversion and the benefits of global diversification.
Equities
Go Small or Go Home
May 6, 2025
This article explores why small caps, especially in the international and emerging regions, present a compelling investment opportunity driven by the potential for higher expected market returns, attractive earnings growth, strong diversification benefits, and rich alpha opportunities.
Alternative Investing
How Do Investors Form Long-Run Return Expectations?
April 28, 2025
We provide an overview of the contrasting ways investors form long-run return expectations and examine the tensions between "objective" yield-based expected returns and "subjective" rearview-mirror expectations. We also discuss the dangers of a rearview-mirror mindset and emphasize the importance of forward-looking measures.
Asset Allocation
Portable Alpha: Why Now?
February 20, 2025
As stock market valuations continue to rise and expected returns correspondingly fall, many investors are hoping to rely more on alpha from active management to make up for a potential future return gap. Unfortunately, long-only active management has struggled during recent history. We review why portable alpha may be an attractive alternative solution in today’s market environment. We also discuss what aspects of a portable alpha solution are important for investors to consider when selecting between implementations.
Equities
A New Paradigm in Active Equity
February 5, 2025
Equity market concentration and technological innovation are two hot topics for active equity investors today. We argue that a systematic approach is uniquely positioned to capitalize on these topics.