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RA Conversations

The Flattening Yield Curve

Cam Harvey looks at the yield curve today through the lens of his 1986 pioneering work on yield-curve inversions and their foreshadowing of economic downturns.

Further Reading

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Where Is the Global Economy Going?
Pundits Predicting Panic in Emerging Markets
The Challenges Of Diversity Investing (email)
The Challenges of Diversity Investing

The business case for diversity is compelling, but the investment case for diversity is less clear-cut. We suggest, therefore, that investors who seek to promote diversity and its business benefits combine diversity with known drivers of excess returns.

 

Further Reading: Unlocking the Performance Potential in ESG Investing

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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

Campbell R. Harvey discusses his latest research paper:
“A Research Protocol in the Era of Machine Learning”

 

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.

Webinar Replay

Ignored Risks of Factor Investing

Factors have risks, and ignoring these risks can leave investors underprepared for the investment journey. By investing in multiple factors, diversification can mitigate the risks of individual factors, reducing a portfolio’s overall risk—but far from all of it.

Webinar Replay

What Matters in Multi-Factor Investing?

In the first of a five-part webinar series, Vitali Kalesnik and Joe Steidl present the business case and academic framework underlying multi-factor investing, as well as the evidence supporting the most popular factors in factor investing.

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Ignored Risks of Factor Investing

Long-only factor investing, often called smart beta, can be a valuable way for investors to achieve their long-term return targets. To achieve the best outcomes, investors should have realistic expectations about the risks factors pose and be prepared to weather potentially prolonged periods of material underperformance.

Feifei Li at the Morningstar Investment Conference

Feifei Li discusses RAFI Multi-Factor, a strategy that offers diversified exposures to robust equity factors.
June 12, 2018

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

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The Biggest Failure in Investment Management: How Smart Beta Can Make It Better or Worse

The biggest failure in investment management—the gap between the returns realized by the investor and the returns earned by the strategy or fund the investor owns—typically remains in the shadows with the glare of the spotlights focused on alpha.

Rob Arnott on Bloomberg TV Asia

“Is China a bargain now?” Rob explains why China is “getting there,” and expands his commentary to include US and emerging-market stocks, and a potential US recession.
October 18, 2018

Chris Brightman on CNBC’s Squawk Box

Listen to Chris explain why he is worried about slowing US economic momentum as a result of fading fiscal stimulus. Chris believes emerging market equities remain a good bargain for investors.
October 11, 2018

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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.

Rob Arnott on Bloomberg TV

July 16, 2018

Bloomberg TV, August 17, 2018

Rob Arnott on Short-Termism
in the Stock Market

Bloomberg TV, August 17, 2018

Rob Arnott on Turkey
and Emerging Markets
TDF Tile
Are Our TDFs Massively Underweight Inflation-Fighting Assets

Allocations to inflation-fighting assets in target-date funds are simply too low in relation to the benefit these asset classes offer investors who are planning for retirement.

Food for Thought: Integrating vs. Mixing

Although a naïve comparison appears to favor the integrating approach to multi-factor strategy construction, many investors may find mixing is a more sensible choice.

Yes. It's a Bubble. So What?

The relentless rise in the US stock market since its low in 2009 has been dramatic. US stock market valuations now exceed all historical valuation levels, except for those hit at the peak of the dot-com craze. This raises an obvious question for investors: Today, in early 2018, and has been the case over the last year, is the US stock market in another bubble? Yes. The more important question then becomes: How should investors react?

Yes It's a Bubble Picture
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.

Recently Published Journal Papers
Is Your Alpha Graphic
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.

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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.

Award-Winning 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.

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.

Winner of the 2015 William F. Sharpe Award for ETF/Indexing Paper of the Year:

A Framework for Assessing Factors and Implementing Smart Beta Strategies

Investors might apply advanced techniques of quantitative analysis to discriminate between genuine premium-bearing factors and the spurious products of data-mining—but here’s a three-step heuristic.

Published in the Journal of Index Investing by Jason Hsu, Vitali Kalesnik, and Vivek Viswanathan.

A Study of Low-Volatility Portfolio Construction Methods

Winner of the 2012 William F. Sharpe Indexing Achievement Award for Paper of the Year

A Study of Low-Volatility Portfolio Construction Methods

Long-term simulations in U.S., global developed, and emerging markets confirm that low-volatility strategies can potentially access risk-diversifying sources of excess return. However, portfolio construction methods should be sensitive to investibility and valuations.

Published in the Journal of Portfolio Management by Jason Hsu, Tzee Chow, Feifei Li, and Li-Lan Kuo.

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Winner of the 2012 William F. Sharpe Indexing Achievement Award for Paper of the Year

Rebalancing and the Value Effect

Value stocks typically enjoy higher dividends than growth stocks. Growth stocks, on the other hand, typically enjoy faster dividend growth. What most investors miss is that a portfolio of value stocks generates faster growth in dividends than a portfolio of growth stocks.

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

 

Interactive Tools

Asset Allocation

Navigate long-term forecasts for over 130 assets and model portfolios.

 

Smart Beta Interactive

Explore expected returns and valuations for smart beta and factor strategies.

Our Strategies

RAFI Strategies

RAFI strategies aim to generate excess returns versus the market benchmark through a systematic, contrarian rebalancing approach.

 

All Asset

All Asset strategies are global tactical asset allocation (GTAA) solutions that aim to deliver real returns, diversification, and inflation protection via tactical long-only exposures.

 

RAE

RAE systematic active equity strategies seek to generate superior risk-adjusted returns.

 

Systematic Alternative Risk Premia

The Systematic Alternative Risk Premia strategy aims to deliver uncorrelated absolute returns through leveraged long–short exposures to liquid derivatives contracts.

Webinar Replays

CAPE Fear: Why CAPE Naysayers Are Wrong

 

Diversification: Is the Free Lunch Worth the Heartburn?

 

Getting Multi-Factor Investing Right Using Robust Factors and Contrarian Timing

 

Forecasting Asset and Portfolio Expected Returns

RA Working Papers on SSRN

What Is Quality?

November 30, 2018

 

Factor Momentum

January 31, 2018

 

Diversification Strikes Again: Evidence from Global Equity Factors

September 15, 2017

 

The Natural Rate of Interest and Bond Returns

August 9, 2017

In the News

 

Barron's: Rising Rates Are Good for Income Investors, Though Not Entirely

November 14, 2018

 

Financial Times: Questions arise of what happens in event of market slide

November 11, 2018

 

Financial Times: Smart beta inflows slow as performance chasers lose patience

November 4, 2018

 

ThinkAdvisor: How to Help Clients Understand the Importance of Rebalancing: Research Affiliates

August 9, 2018

 

Portfolio Rebalancing? Clients Would Literally Rather Be In Traffic

August 8, 2018

 

The Washington Post - Apple makes history by hitting the $1 trillion cap. How high could it go?

August 3, 2018

 

Research Affiliates’ Partner Mike Aked Relocates to Australia to Support and Grow Firm’s Local Presence

August 1, 2018

 

MarketWatch - S&P 500's slimmer dividend yield could leave less money on the table for stock investors

August 1, 2018

 

Bloomberg Opinion - How to Build a Better Index Fund

July 31, 2018

 

The Big Picture: MIB: Rob Arnott of Research Affiliates

July 28, 2018

 

U.S. News & World Report - Do's and Don'ts of Tax-Efficient Investing

July 27, 2018

 

Institutional Investor: Research Affiliates, Don't Fear Emerging Markets. Buy the Dip!

June 28, 2018

 

Bloomberg: Pimco Adviser Re-Ups Its 'Trade of a Decade' in Emerging Markets

June 28, 2018

 

Business Insider: Even the world's most successful investment firms pay Rob Arnott for advice - here's where he says you should be putting your money

June 28, 2018

 

Financial Advisor: Arnott, Taxes Take Biggest Bite Out Of Investment Returns

June 18, 2018

 

WSJ: Acclaimed Fund Manager's Latest Target: Hidden Costs of Indexing

June 11, 2018

 

Think Advisor: Advisors, Don't Waste Your Time on Manager Selection: Research Affiliates

June 5, 2018

 

WSJ: How Corporate America Tries to Forget Its Mistakes

June 8, 2018

 

Corporate Governance Expert Dr. Alex Edmans Becomes an Advisor to Research Affiliates

June 8, 2018

 

Barron's: Rob Arnott on Beating Stock Indexes

June 4, 2018

 

Financial Times: This is a tech bubble, when's the crash?

May 27, 2018

 

Financial Times: Don't bet against bubbles, look for 'anti-bubbles'

May 26, 2018

 

Financial Times: Smart beta 'godfather' taps into demand for ESG investments

May 13, 2018

 

New York Times: The Falling Dollar Means Investors Should Look Abroad – Carefully

May 13, 2018

 

Barron's: Research Affiliates Bets ESG and Smart Beta Are Two Great Tastes That Go Great Together

May 12, 2018

 

Bloomberg News: Today's Tech Winners Are Likely to Be Tomorrow's Losers, Arnott Says

April 24, 2018

 

Research Affiliates Expands European Footprint as Head of Equity Research Moves to the Firm’s London Office

April 20, 2018

 

Research Affiliates Launches New RAFI ESG Strategy

April 12, 2018