May

12

 A friend asked me what I thought about this article about momentum investing by Cliff Asness.

I read the current interview with Cliff in Forbes as I couldn't download the paper. He manages 100 billion. Can't make money that way other than buying stocks and holding. He likes value. All the studies show that growth beat value the previous 5 years. As for momentum, there are too many years like 2008 where the worst did 85 percentage points better than value. I doubt that Asness uses as is files for their work before 2000 or so, so everything before hand is worthless. He talks about Shiller respectfully who some think is a charlatan, bearish since 1996, that Professor Lo has often brought to bear. I don't believe p/b gives useful result because of the survival bias not taken into account in any of the studies. Asness seems a plodding, well intentioned personage who must talk his book as is appropriate. One wishes there was a way to short the results of his fund versus the market.

Anatoly Veltman writes:

Just want to check a revolutionary idea. We've passively observed many regulatory misdeeds for a number of years, without getting bearish. It was ok with me as valuations gradually changed over 1000, 1200, 1400, 1600, 1800. I'm getting somewhat quizzy, when I hear "Can't make money that way other than buying stocks and holding. He likes value." Reminds me of the very-very common thinking about "real property" prior to the eventual 2007 unravel. Most people (or families) back then have never made a single investment decision in their lives (other than buying one house long ago) - yet they were all paper millionaires and felt special about their investing prowess… I'm not saying market demise is imminent, I'm just saying "Can't make money that way other than buying stocks and holding. He likes value" should objectively be nauseating.


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