Archive | Evidence Based Investing

predicition

Second Hand News and Predictions

Predictions are hard to do, especially about the future. (Sidebar: Origins of this quote – you may be surprised). Yet, people seem to believe that they, or somebody, are able to predict what is going to happen next. What is going to happen next? If the news says this, then that? And how do the […]

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Investing_money

The Cost of a Perfect Market Timing Strategy

I recently read a Dimensional study* by the same name. “What if we could construct a strategy with a correlation close to 1 with a perfect market timing strategy? Can we estimate what its returns would have been? Can we use these estimates to understand what the market would have “charged” for a perfect market […]

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behavior

The “skittles chart” of country returns & country market sizes

Last week I discussed a skittles chart (periodic table of investment returns) for common indexes and broad asset class returns. Below you will see how returns of various countries compare year by year for both developed and emerging markets. From dfa matrix book us_2015 from Better Financial Education Yes – it is hard to see specific […]

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leave the past

The “Skittles Chart” – periodic table of returns

What can we learn when we look at a table of past returns? Past returns don’t predict future returns. Over the long term, returns revert to the mean for each asset class of investment. It pays to diversify (what is the difference between allocation and diversification?). Here’s a short video that explains the table of […]

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Dimensional

Behavior: Evidence-Based Investing Insights Part 4 of 4

Evidence-Based investing comes from a compilation over more than a half century of many independent peer reviewed research results of how markets work. There are 12 key insights in this 4 part video series. Here are the last two insights in this 5:47 video on behavior: 11. The human factor is the most important of all the factors. […]

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Dimensional

Return Factors: Evidence-Based Investing Insights Part 3 of 4

Evidence-Based investing comes from a compilation over more than a half century of many independent peer reviewed research results of how markets work. There are 12 key insights in this 4 part video series. Here are the third increment in this 4:48 video about return factor insights: 7. Where to returns come from? With a bond? With a stock? 8. No […]

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Dimensional

Diversity: Evidence-Based Investing Insights Part 2 of 4

Evidence-Based investing comes from a compilation over more than a half century of many independent peer reviewed research results of how markets work. There are 12 key insights in this 4 part video series. Here are the second 3 in this 4:50 video about diversity insights: 4. Diversification is important. It reduces exposure to different kinds of risk and […]

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Dimensional

Market Pricing: Evidence-Based Investing Insights Part 1 of 4

Evidence-Based investing comes from a compilation over more than a half century of many independent peer reviewed research results of how markets work. There are 12 key insights in this 4 part video series. Here are the first 3 in this 4:28 video about market pricing insights: Group intelligence – the market does a better job than […]

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variable

Research in Focus: Can You Predict a Good Time to Buy and Sell Stocks?

Can investors predict when to buy and sell securities? Jim Davis, PhD,* runs more than 780 tests on data from 15 stock markets to test this theory. Can you consistently buy low and sell high? Is there real world evidence of knowing when the best times are and being profitable in the process? They looked […]

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New_York_Stock_Exchange_-_Frontal_-_NYSE

Reconstitution effects on inflexible indexes

The following phenomenon results from “reconstitution” has been well known for years. However, with the increasing popularity of indexing, I’m glad some light has been shined on the topic because this shows the difference between a retail structured index, that all mutual funds following an index are subject to, and a proprietary structured index such as Dimensional. […]

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