{"title":"On the Specificity of Factor Signal Calculations","authors":"Mark K. Pyles","doi":"10.3905/jwm.2023.1.220","DOIUrl":"https://doi.org/10.3905/jwm.2023.1.220","url":null,"abstract":"This article examines the specificity of calculations for Bloomberg factor signals within five prominent factor categories, with a focus on practical analysis and application. We examine their performance from 2003 to 2021, from both a return and a stability standpoint of the factors, focusing on the importance of understanding the sensitivity of the reported signals to calculation definitions. We find that, in most cases, a better return and risk performance is found by combining non-extreme definitions in creating factor signals. Our findings suggest that an approximately 3% range of deviation around the baseline signal can be expected, dependent upon the specification of the signal calculation. Finally, we examine the potential impact of differing calculations on portfolio performance measurement. Ultimately, we conclude that investors should be careful in extrapolating presented factor values both in a macro sense of market impact and as it relates to portfolio exposures.","PeriodicalId":175460,"journal":{"name":"The journal of wealth management","volume":"30 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2023-09-18","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"135202914","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
{"title":"Investing Following Bad News: Worse Is Better","authors":"Haim A. Mozes","doi":"10.3905/jwm.2023.1.221","DOIUrl":"https://doi.org/10.3905/jwm.2023.1.221","url":null,"abstract":"This article demonstrates four principal results. First, returns from an investing strategy based on prior news are driven by future news that reinforces the prior news. This result provides additional nuance to the literature showing that momentum returns occur due to underreaction to news. Second, returns are higher, on average, for firms with bad news in the prior period than for firms with no news in the prior period. While markets initially under-adjust to bad news, there is an increased expectation that there will be bad news in the next period (albeit not high enough), so that negative news in the next period is less costly, positive news in the next period is more profitable, and no news in the next period is akin to good news. Third, returns for firms with two prior periods of bad news or with more thorough bad news are higher than for other firms with bad news. The rationale is that repeated bad news or more thorough bad news convinces investors that the bad news is “real” and results in the market more fully pricing the bad news. Fourth, the market’s response to a given period’s news is a function of prior periods’ news.","PeriodicalId":175460,"journal":{"name":"The journal of wealth management","volume":"23 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2023-09-15","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"135397235","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
{"title":"Enhancing GARP Investing: Creating a New and Improved PEG Ratio","authors":"Andrew H. Cohen, Feng Dong","doi":"10.3905/jwm.2023.1.219","DOIUrl":"https://doi.org/10.3905/jwm.2023.1.219","url":null,"abstract":"In this article, we unveil a new factor to enhance alpha for GARP investing. Our factor significantly enhances the original PEG ratio with the following updates: we utilize free cash flow instead of earnings; we consider intangible assets; and we use a forward-looking expected growth rate instead of a backward-looking historical growth rate. We then demonstrate that our new factor is significantly more robust than the PEG ratio, and that GARP investors can replace the PEG Ratio with our new factor in their models to capture a significant expected increase in alpha.","PeriodicalId":175460,"journal":{"name":"The journal of wealth management","volume":"41 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2023-09-14","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"134913150","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
{"title":"Toward a Literature of Wealth Management","authors":"William W. Jennings","doi":"10.3905/jwm.2023.1.207","DOIUrl":"https://doi.org/10.3905/jwm.2023.1.207","url":null,"abstract":"We characterize the wealth management literature that The Journal of Wealth Management helped define over the last quarter century and then assess its impact. Eight key areas of emphasis include goals-based asset allocation, tax barriers, the extended portfolio, asset location, after-tax asset allocation, tax-loss harvesting, concentrated portfolios, and qualitative matters. The Journal of Wealth Management has contributed valuably in each of these areas and is increasingly well regarded among academic researchers. Some gaps in the literature, however, remain.","PeriodicalId":175460,"journal":{"name":"The journal of wealth management","volume":"8 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2023-04-25","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"133504059","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
{"title":"Leading Economic Indicator and Global Stock Market Returns","authors":"Todd J. Feldman, A. Jung","doi":"10.3905/jwm.2022.1.168","DOIUrl":"https://doi.org/10.3905/jwm.2022.1.168","url":null,"abstract":"Feldman, Jung, and Klein’s 2015 paper finds that the combination of The Conference Board’s Leading Economic Indicator (LEI) and a 200-day simple moving average outperforms a buy and hold strategy on an absolute and risk-adjusted basis for the US stock market. We propose to examine whether the results for the US market hold for markets outside the United States in addition to the US stock market. Results indicate the LEI and 200-day moving average strategy holds for six of the eight markets, namely the United States, Germany, France, Japan, South Korea, and Mexico, outperforming a buy and hold strategy on an absolute and risk adjusted basis. Nevertheless, statistical results provided mixed results on the statistical significance of the investment timing results. Other results indicate that examining LEI across markets can be useful for timing the US market.","PeriodicalId":175460,"journal":{"name":"The journal of wealth management","volume":"58 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2022-03-26","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"134638077","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
{"title":"ESG Investing: Conceptual Issues","authors":"Bradford Cornell","doi":"10.2139/ssrn.3621163","DOIUrl":"https://doi.org/10.2139/ssrn.3621163","url":null,"abstract":"Using criteria based on environmental, social, and governance (ESG) considerations has become an increasingly important aspect of investment decision making, particularly for high-profile institutional investors. As of 2019, sustainable assets under management were estimated to be $30 trillion worldwide. The claim here is that the enthusiasm for ESG investing has been exaggerated for three reasons. First, it is not clear what constitutes an ESG investment in the context of a complex, integrated economy. Second, the impact on investment performance of a preference for ESG investments has not been sufficiently recognized outside academic circles. Finally, many leading practitioners have stated that the importance of ESG considerations implies that the corporate objective of maximizing shareholder value, which lies at the core of much of finance theory, is outdated and needs to be replaced by a more comprehensive stakeholder model. The conclusion is that both the benefits of the traditional model and the dangers of a broader stakeholder model have not be adequately appreciated. TOPICS: ESG investing, portfolio construction, wealth management Key Findings • Investors need to recognize that a lower cost of capital for firms with high ESG scores means lower expected returns for investors. • Returns realized as the market comes to recognize highly rated ESG companies are not indicative of long-run expected returns. • ESG policies, such as a carbon tax, need to be set by elected officials, not corporate executives who have neither the proper training nor the proper incentives.","PeriodicalId":175460,"journal":{"name":"The journal of wealth management","volume":"64 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2020-06-07","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"127156834","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
{"title":"Normative Listing and Description of Mutual Fund Transparent and Opaque Fees and Expenses","authors":"John A. Haslem","doi":"10.3905/jwm.2019.1.069","DOIUrl":"https://doi.org/10.3905/jwm.2019.1.069","url":null,"abstract":"This article provides mutual fund shareholders with a normative listing of transparent and traditionally opaque fees and expenses designed for most all funds. The most likely next step, if any, would be for a few “stewardship funds” to adopt the normative listing of transparent and traditionally opaque fees and expenses and attach to each its percentage cost to total net assets, if any. This analysis is needed, for one reason, because a large percentage of individual investors, especially those with low financial literacy, are unaware of the existence of traditionally opaque fund fees and expenses, no less their percentage costs.","PeriodicalId":175460,"journal":{"name":"The journal of wealth management","volume":"28 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2019-04-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"134645213","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
{"title":"Volatility Weighting over Time in the Presence of Transaction Costs","authors":"Valeriy Zakamulin","doi":"10.3905/jwm.2019.21.4.033","DOIUrl":"https://doi.org/10.3905/jwm.2019.21.4.033","url":null,"abstract":"Numerous empirical studies demonstrate the superiority of dynamic strategies with a volatility-weighting-over-time mechanism. These strategies control the portfolio risk over time by adjusting the risk exposure according to updated volatility forecasts. Yet, to reap all the benefits promised by volatility weighting over time, the composition of the active portfolio must be revised rather frequently. Transaction costs represent a serious obstacle to benefiting from this dynamic risk control technique. In this article, we propose a modified volatility-weighting strategy that allows one to reduce dramatically the amount of trading costs. The empirical evidence shows that the advantages of the modified volatility-weighting strategy persist even in the presence of high transaction costs.","PeriodicalId":175460,"journal":{"name":"The journal of wealth management","volume":"348 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2016-01-11","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"121619147","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
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