Research Affiliates

Get Research Affiliates' views on navigating the market turmoil during the coronavirus crisis.

DATA UPDATED AS OF 3/31/20

Smart Beta Interactive

The Covid Crash has disrupted equity markets the world over. Our updated Smart Beta Interactive tool shows the impact of these dislocations.

Reports of Value's Death May Be Greatly Exaggerated (Updated)

Value investing has underperformed growth investing for the last 13.3 years. The drawdown is the longest and deepest since 1963 and is explained by value becoming unusually cheap relative to growth. As of March 31, 2020, the relative valuation of the HML value factor fell to the 100th percentile of the historical distribution. With this article, the authors update an earlier January 2020 version with data through 1Q 2020.

Too Soon? Pandemic Policy Response Raises Risk of Inflation

The Fed’s $5 trillion bazooka, helicopter drops of cash, and a tripling of deficits over the next two years imply a future bout of high and volatile inflation unless fiscal policy nimbly pivots to help prevent the toxic side effect of a spike in inflation. Is that expectation realistic?

"What Is Quality?" wins Graham and Dodd Award

Congratulations to Vitali Kalesnik and Jason Hsu, with co-author Engin Kose, for winning the prestigious Graham and Dodd Award. Read the article and watch CFA Institute's graphic abstract.

As Markets Burn

Major adjustments in capital markets around the globe have changed our long-term expected return forecasts for the 100+ assets we model. Before the corona crash we forecast long-term real returns for US equities to be only 1% a year. Now new, lower valuations suggest higher returns.

WEBINAR REPLAY

Capital Market Expectations: COVID-19 Update

Uncertainty and heightened volatility continue to dominate global markets. In this one-hour webinar, Rob Arnott, James Masturzo, and Brandon Kunz share Research Affiliates’ updated forecasts for capital markets in light of the COVID-19 pandemic and provide actionable insights for investors.

Oh My! What’s This Stuff Really Worth?

The macroeconomy, credit conditions, capital markets, and politics are all flashing warning signs that the capital markets may be near an inflection point. COVID-19 may be the tipping point that triggers the what’s-this-worth question many investors ask all at once. Under market pressure, what is your portfolio really worth?

WEBSITE ENHANCEMENT

New Web Pages for Australia Content

Find our recent Australia research, insights, and more at researchaffiliates.com/australia.

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Insights from Senior Leadership

The Winning Formula: Mission + Culture + Team

CEO transitions are a great time to focus on refining the enduring formula of a firm’s success. Katrina Sherrerd's formula has three equally important elements: mission, culture, and team. The result are win-win-win outcomes—that is, a win for our end investors, a win for our distribution partners, and a win for ourselves.

Alice’s Adventures in Factorland: Three Blunders That Plague Factor Investing

Over the last 15 years, factor returns have not delivered on investors’ expectations. Are factors broken or far riskier than investors believe? Investors could dismiss the approach based on recent poor performance, but perhaps a better path would be to gain an understanding of three risks associated with factor investing. Doing so can help investors form more realistic return expectations.

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Alternative Risk Premia:
Crisis or Opportunity?

We believe a solid understanding of the specific underlying return drivers of ARP strategies can improve investors’ odds of maximizing the long-run investment opportunity of ARP investing.

Further Reading
Alternative Risk Premia: Valuable Benefits for Traditional Portfolios

Backtesting Machine Learning keyart (email)

Backtesting Protocol in the Era of Machine Learning

Machine learning provides the investment industry with a new set of tools. However, investors need to be cautious. Machine learning is being hyped and sometimes misapplied.

Vitali Kalesnik on
Bloomberg TV

Vitali Kalesnik discusses factor investing and how the ETF landscape has changed the way we talk about markets, value, and growth.
October 18, 2018

Recently Published Journal Papers

Winner of the 2018 Bernstein Fabozzi/Jacobs Levy Award for Best Article

King of the Mountain-The Shiller P/E and Macroeconomic Conditions

Valuation, always an effective tool for long-term investors, can also be useful for assessing short-term market prospects. The authors demonstrate that conditioning CAPE on current inflation and real yields substantially improves its accuracy in forecasting returns for periods from one month to one year.

Published in the Journal of Portfolio Management by Rob Arnott, Tzee Chow, and Denis Chaves.

Is Your Alpha Big Enough to Cover Its Taxes? A Quarter-Century Retrospective

Recognizing that the management of taxable portfolios has advanced in the past 25 years, the authors of the present paper update a seminal 1993 study in which Robert H. Jeffrey and Robert D. Arnott introduced the concept of a normally negative “tax alpha” and formulated tactics to reduce its detrimental impact on investment results.

Winner of the 2016 Graham & Dodd Scroll Award Of Excellence Paper

Will Your Factor Deliver? An Examination of Factor Robustness and Implementation Costs

Not every factor profits investors when implemented through a passive strategy. Size and quality show weak robustness, and liquidity-demanding factors, such as illiquidity and momentum, are associated with high trading costs.

Published in the Financial Analysts Journal by Jason Hsu, Vitali Kalesnik, Noah Beck, and Helge Kostka.

Smart Beta Multifactor Construction Methodology: Mixing versus Integrating

All of the well-established factors to which investors gain exposure in low-cost smart beta funds are expected to deliver a premium in the long run, but none is guaranteed to outperform at all times. Seeking diversification, many investors have turned to strategies that exploit multiple factors. Published in the Journal of Index Investing.

Hobbled by Benchmarks

Many investment organizations benchmark their funds’ performance against the classic 60/40 mix of domestic stocks and bonds, but this posture limits their ability to earn superior risk-adjusted returns. The authors argue that investors can fully realize the well-established benefits of asset-class diversification only if they are seriously willing to revisit their policy portfolios, investment guidelines, and benchmarks.