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Popular Asset on Allocation Articles

Pundits Predicting Panic Graphic
Pundits Predicting Panic in Emerging Markets

A rational analysis of the emerging markets affirms our belief that now is the time to buy, not sell. The panic being peddled by pundits today is simply not justified.

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Buy High and Sell Low with Index Funds!

Traditional index funds match market performance and have negligible trading costs with low tracking error—or do they? Not actually—they routinely buy after high price appreciation and sell after high price depreciation. They also have significant trading costs from adding and deleting stocks. We show how index providers can construct better-performing indices that are less prone to performance chasing and have lower turnover.

Yes It's a Bubble Picture
Yes. It's a Bubble. So What?

With sky-high valuations in the US stock market, and what we believe is a tech bubble that has dangerous implications for other areas of the market, we suggest four actions investors can take now to avoid the inevitable bursting of the bubble, and which will likely benefit their portfolios’ long-term performance potential.

CAPE Fear: Why CAPE Naysayers Are Wrong

Beware the consequences of assuming that elevated CAPE ratios are here to stay, but if they are the “new normal,” low future returns are likely to be the “new normal” as well.

Pricing Stocks and Bonds

A look at a simple, robust framework for estimating long-term asset-class forecasts, and its underlying assumptions, offers insights as to how asset managers can build a portfolio to meet investors’ future financial needs.

The Bubble That Never Came (and Other Misconceptions about Treasury Bonds)

A 10-year US Treasury note yielding just little above 2% does feel expensive. Yet we should not be misled by appearances. Our research shows that, contrary to common wisdom, Treasury bonds are only moderately overvalued. All in all, bonds are not as unattractive as a simple historical comparison of their yields may suggest.

Time Diversification Redux

Understanding how a common and simple definition of risk, such as the standard deviation of returns, differs over various time horizons has important implications for investors. We discuss why the relationship between investment horizon and risk matters.

CAPE Fatigue

When investors rely on any particular model all the time—and CAPE is often that model—fatigue inevitably sets in. We believe that a better approach for meeting future spending needs is to blend portfolios based on different models of return expectations.

Quest for the Holy Grail: The Fair Value of the Equity Market

Macroeconomic volatility is a useful tool for contrarian investors who are seeking fair value in an equity market characterized by continually rising valuations.

The Emerging Markets Hat Trick: Time to Throw Your Hat In?

The rare combination of exceptional valuation levels, depressed currencies, and powerful price and economic momentum should encourage long-term investors to “throw their hats” into the emerging markets rink.

Record Low Costs to Trade
Record Low Costs to Trade!

Mean reversion is as applicable to trading costs as it is to valuation. Today’s costs to trade are at 56-year historical lows; they are due to rise soon. Now is the time to position your portfolio ahead of expected higher costs to trade and lower equity prices.

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Next Season's Meager Harvest in Commercial Real Estate

US commercial property investors reaped high real returns over the last five years, but the climate is changing. Property prices are high, yields are low, and future expected returns portend a scantier harvest over the coming decade.

When a Storm Is in the Offing: Fundamental Growth in the U.S. Equity Market

Forecasting the weather or stock prices is a mostly mundane matter, but the unforeseen can exact a heavy toll. For investors, economic data improve the precision of market forecasts.

Forecasting Returns: Simple Is Not Simplistic

The value of a forecasting model is that it improves on the alternative models available and classifies the forecaster’s knowledge of asset classes into an economically intuitive framework for building portfolios. A yield-based model is simple, but it checks both boxes.