This article updates our estimates of medium-term (5- to 10-year) expected returns for major asset classes. Selected estimates are summarized in Exhibit 1. In 2024, equity markets rallied for a sec...
In the face of lower-than-average expected returns for equities, some investors may be considering adding active management to their equity allocations. However, the evidence supporting active long...
Common wisdom has suggested that small, simple models are best suited for market timing applications, given finance’s “small data” constraint and naturally low predictability. However, we show that...
We illustrate how combining VPFs (variable prepaid forwards) with tax-aware strategies can help diversify low-basis stock and thereby improve after-tax wealth accumulation. Long-run after-tax wealt...
The greenium (the expected return of green securities relative to brown) is a central impact measure for ESG investors. We propose a robust green score combined with forward-looking expected return...
There is a range of solutions aimed at reducing the risk of concentrated stock tax-efficiently: completion portfolios, exchange funds, charitable giving, just to name a few. But for some investors,...
Contrary to conventional wisdom, we theoretically prove that simple models severely understate return predictability compared to “complex” models in which the number of parameters exceeds the numbe...
We analyze the historical macroeconomic sensitivity of traditional asset classes and major hedge fund strategies. We show that the average hedge fund is unlikely to provide meaningful diversificati...
Our previous post showed the power of deferral for building wealth, but one key assumption in that analysis was that tax rates remain constant. In this post, we discuss whether gain deferral is sti...
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