The standard deviation, arguably the most widely-used measure of risk, suffers from at least two limitations. First, the number itself offers little insight; after all, what is the intuition behind the square root of the average quadratic deviation from the arithmetic mean return? Second,...

As much as fundamental indexation is novel and controversial, international diversification is traditional and widely accepted. This article links both issues and evaluates a fundamental strategy of international diversification. Considering 16 country benchmarks that make up over 93% of the...

The failure rate is arguably the variable most widely used in the evaluation of retirement strategies. Its main shortcoming, evaluating how often a strategy fails but not by how much it does, is overcome by shortfall years, which considers precisely this information. The joint use of the failure...

Financial planners are keenly aware of, and routinely warn clients about, sequence risk; that is, the possibility of facing a sequence of low returns early in retirement that may force retirees to scale down the plans they had made. This really is a scary scenario, but one that the evidence here...

Multifactor funds, which offer risk factor diversification, have several appealing characteristics. They enable investing in factors, which has become a typical way to enhance a portfolio’s long-term risk-adjusted return; they provide exposure to more than one factor, which enables...

Individual investors typically determine their asset allocation using investor questionnaires, which can be viewed as black boxes that generate a result without highlighting the benefits and costs of the portfolios considered. This article introduces an asset allocation tool, the gain-pain index...

Multiples such as D/P, P/E, and CAPE are useful when forecasting long-term returns, and largely useless when forecasting short-term returns. Given this mixed forecasting ability, the issue addressed in this article is whether these multiples can be used to devise successful asset allocation...