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Multifactor World

What to Make of 10-Year Small-Cap and Value Results

  • January 25th, 2016
  • Multifactor World

Ken French’s recently updated global factor data shows the global size and value premiums were basically flat for the past 10 years (the value premium was actually about –1 percent per year over this span). This long-term historical result has surprised many people and naturally led some to ask whether these premiums can be expected… Read More

How Much Are You Paying for Your Size and Value Tilt?

  • April 27th, 2015
  • Multifactor World

It’s becoming clear that the price for overall U.S. equity market exposure is close to zero. Many market-cap weighted index funds and exchange-traded funds from Vanguard and others are charging expense ratios of five basis points (bps) or less. An interesting, and more difficult, question to answer: How much are you paying to gain exposure… Read More

Comparing DFA Small Value to Vanguard Small Value

  • April 20th, 2015
  • Multifactor World

Over the past few months, the difference in historical performance between DFA Small Value (ticker: DFSVX) and Vanguard Small Value (VISVX) has narrowed. For example, for the 10-year period ending December 2014, the compound annual return of DFSVX was 7.9 percent while VISVX earned 8.3 percent. Comparatively, for the 10-year period ending December 2012, compound… Read More

Deflation and Stock and Bond Returns

  • February 23rd, 2015
  • Multifactor World

Overview: With expected inflation rates very low, there will be significant attention on the possibility of deflation causing the stock market to fall. This blog examines the relationship between the rate of inflation and stock and bond returns. Generally, the research shows that stock returns are no lower in deflationary environments than in normal inflationary… Read More

An Analytical Evaluation of Rising Glidepath Claims

  • September 29th, 2014
  • Multifactor World

Last year, a piece by Michael Kitces and Wade Pfau made the claim that mechanically increasing the equity allocation during retirement — which they term a “rising glidepath” — could reduce the likelihood that a retiree outlives his or her assets and could decrease the magnitude of shortfall when capital market returns disappoint. Specifically, the… Read More

Resurrecting the Size Premium

  • August 25th, 2014
  • Multifactor World

There have been a number of articles over the past few years claiming to refute the existence of a small-cap (or size) premium, which is the historical difference in returns between small-cap stocks and large-cap stocks. While the critiques have been somewhat varied, two common claims are that the risk-adjusted returns of small-cap stocks have… Read More

Are Some Bond Fund Prices Stale?

  • August 18th, 2014
  • Multifactor World

I have long been skeptical of how fair bond fund prices are — or more accurately said, the potential ability for knowledgeable investors to “game” bond fund prices — in fixed income asset classes where liquidity isn’t great. Two asset classes that immediately come to mind are municipal bonds and high-yield corporate bonds. I finally… Read More

Protecting Against Inflation: Evaluating Inflation Hedge Misconceptions and Strategies

  • June 9th, 2014
  • Multifactor World

The financial media are full of conjecture about which strategies might effectively hedge inflation risk or not. Here we explore which asset classes, if any, have been effective at protecting against inflation risk. First, it is helpful to address some common logical and analytical misconceptions about hedging inflation risk. Focus on Correlation, Not Volatility When… Read More

Perspective on High-Frequency Trading

  • April 14th, 2014
  • Multifactor World

I have received a number of questions since “60 Minutes” ran a piece on high-frequency trading (HFT)on March 30 (lest we forget, this is the same “60 Minutes” that ran a piece in 2010 that predicted the municipal market would implode in 2011, and we all know how that turned out). I’ll summarize what I think… Read More


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