We are often asked for our estimate of the long-term return of the equity market. Our framework currently indicates 5.3% above inflation for global equities, which we know strikes many investors as high. This is understandable, given that the most available and frequently cited valuation ratio...

We steer our financial course through life choosing how much to spend and how to invest what's left, periodically updating our choices as circumstances evolve. This is the essence of financial planning: specifying in advance a desired spending and investment policy conditional on relevant...

We propose a simple non-equilibrium model of a financial market as an open system with a possible exchange of money with an outside world and market frictions (trade impacts) incorporated into asset price dynamics via a feedback mechanism. Using a linear market impact model, this produces a...

We improve on our Vigilant Asset Allocation (VAA) by the introduction of a separate “canary” universe for signaling the need for crash protection, using the concept of breadth momentum. The amount of cash is now governed by the number of canary assets with bad (non-positive) momentum. The...

Benjamin Franklin's original maxim found in Poor Richard's Almanac was actually "A penny saved is two pence clear" rather than the more commonly known "A penny saved is a penny earned." We believe he was getting at the notion that one risk-free penny is worth two pennies of expected but...

Robert Shiller shows that Cyclically Adjusted Price to Earnings Ratio (CAPE) is strongly associated with future long-term stock returns. This result has often been interpreted as evidence of market inefficiency. We present two findings that are contrary to such an interpretation. First, if...

In a world of low rates and high stock prices, it's natural many investors are looking for ways to earn a good return with limited exposure to equities. However, many candidate strategies have return distributions which are significantly different from the Normal and Log-normal distributions...

This presentation reconsiders Knight's Risk, Uncertainty, and Profit of 1921 in light of the emergence of the World Wide Web in early-1990s, Emanuel Derman's pioneering work in Model Risk Management at Goldman Sachs in mid-1990s, backlash against quantitative models in aftermath of the Global...

Early in the 1950s, academics and investors started proposing in earnest a variety of summary statistics to capture in a single number the quality of an investment. Sharpe Ratio became the most commonly used, and it's an important metric, but maximizing Sharpe Ratio doesn't always maximize...

The success of the endowment model of investing has long been the envy of both Wall Street and Main Street investors. Despite all of the press on how to invest like an endowment, the strategy can still be a bit of a mystery for industry outsiders. To shed some light on how endowment performance...