tag:blogger.com,1999:blog-7905515.post1802936735285883315..comments2024-03-14T11:09:32.759-05:00Comments on Falkenblog: Beta 1.0: A New Low Cost Indexing StrategyEric Falkensteinhttp://www.blogger.com/profile/07243687157322033496noreply@blogger.comBlogger11125tag:blogger.com,1999:blog-7905515.post-43958275726161812462010-09-27T23:45:01.564-05:002010-09-27T23:45:01.564-05:00What happens when you seek an even lower beta, say...What happens when you seek an even lower beta, say 0.80, do the returns continue to increase relative to the S&P500?Jay Walkerhttps://www.blogger.com/profile/09864804379266346012noreply@blogger.comtag:blogger.com,1999:blog-7905515.post-92097885365465588962010-09-21T12:50:02.615-05:002010-09-21T12:50:02.615-05:00I think the returns you have shown are more a func...I think the returns you have shown are more a function of equal weighting the 100 stocks. Compare returns of the RSP (equal weight S&P 500) and SPY during the same time period to see what I mean.Dave Beckmanhttps://www.blogger.com/profile/06370701530659211545noreply@blogger.comtag:blogger.com,1999:blog-7905515.post-72524121180558217302010-09-21T07:57:28.332-05:002010-09-21T07:57:28.332-05:00oops, I don't know how the Belgian thing happe...oops, I don't know how the Belgian thing happened...<br /><br />I equal weighted the 100 stocks...<br /><br />Expected returns can only be inferred from average returns...Eric Falkensteinhttps://www.blogger.com/profile/07243687157322033496noreply@blogger.comtag:blogger.com,1999:blog-7905515.post-13812154425129483172010-09-21T06:11:54.898-05:002010-09-21T06:11:54.898-05:00Are the stocks in your low vol portfolio equal wei...Are the stocks in your low vol portfolio equal weighted or market cap weighted? If equal weighted then your benchmark should be the equal weighted S&P not the traditional S&P which is cap weighted. The equal weighted index has outperformed the cap weighted and this might explain some of your out performanceAnonymousnoreply@blogger.comtag:blogger.com,1999:blog-7905515.post-77469396243633956152010-09-21T05:34:27.413-05:002010-09-21T05:34:27.413-05:00Robeco is Dutch, not Belgian - the first two lette...Robeco is Dutch, not Belgian - the first two letters are "Ro" for "Rotterdam".dsquarednoreply@blogger.comtag:blogger.com,1999:blog-7905515.post-51356587597318330012010-09-21T03:19:21.527-05:002010-09-21T03:19:21.527-05:00is your index (the blue line) cap weighted or unif...is your index (the blue line) cap weighted or uniform weight ?Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-7905515.post-28538452045005291422010-09-21T00:35:25.638-05:002010-09-21T00:35:25.638-05:00How do the returns look for a Beta 0.75 approach? ...How do the returns look for a Beta 0.75 approach? I'm guessing it would have under-performed since 1962, but how did it do during secular bear markets (e.g., 1966-1982, or 2000-present)?Davehttp://steamcatapult.com/noreply@blogger.comtag:blogger.com,1999:blog-7905515.post-16984397624094517702010-09-20T22:02:20.086-05:002010-09-20T22:02:20.086-05:00I would guess that you get part of your result bec...I would guess that you get part of your result because you're dealing with historical returns, rather than expectations (of course you get this in the fund industry as well). <br /><br />In Black-Litterman you back out the implied returns from the market-capitalization weights. Given equal weight in a benchmark, stocks with high volatility have high implied returns. However, if returns are closer to average, then it would imply a very large overweight in the stocks with low volatility. (I used a simple example with 10 assets, 1 asset with a 5% standard deviation and the rest increasing by 2%, 33% correlations between them all, and a risk aversion coefficient of 5).Johnhttps://www.blogger.com/profile/01457388998903348000noreply@blogger.comtag:blogger.com,1999:blog-7905515.post-81339962008282463112010-09-20T21:40:04.222-05:002010-09-20T21:40:04.222-05:00For someone who currently just puts all his saving...For someone who currently just puts all his savings in vanguard index funds, and wants to think as little as possible about investing, what options are available which use this strategy? Are there mutual funds that you'd recommend?Talnoreply@blogger.comtag:blogger.com,1999:blog-7905515.post-67850959321865515062010-09-20T21:26:33.115-05:002010-09-20T21:26:33.115-05:001.0 is average1.0 is averageEric Falkensteinhttps://www.blogger.com/profile/07243687157322033496noreply@blogger.comtag:blogger.com,1999:blog-7905515.post-66186217749147693232010-09-20T21:15:27.002-05:002010-09-20T21:15:27.002-05:00I guess it is just empirical that "near 1&quo...I guess it is just empirical that "near 1" is better than "as low of Beta as possible"? Or, what is your rationalization for why 1 is "magic"?Anonymousnoreply@blogger.com