Diversification Is Not A Free Lunch

Diversification is only a free lunch under uncertainty and ignorance, i.e. if the investor does not have any information about expected returns and risk and selects stocks randomly. […] While Sharpe Ratios can increase if the reduction of risk is greater than the reduction in the expected return, the increased Sharpe Ratio cannot be labelled a free lunch as it comes at the cost of a lower expected return.

Fazit: „There is no such thing as a free lunch“ (Milton Friedman).

 

Production of U.S. Rm-Rf, SMB, and HML in the Fama-French Data Library

Factor models, no matter how constructed, leave holes in the explanation of expected asset returns. […] Expected return estimates for specific assets or portfolios from asset pricing models are unreliable.

Fazit: Man kann sich nicht auf Faktormodelle verlassen.

 

How Can Financial Constraints Force a Central Bank to Exit a Currency Peg? An Application to the Swiss Franc Peg

External shocks such as QE policies in the foreign country can make balance sheet constraints become relevant, making it optimal for the central bank to exit its peg policy earlier than it would have done absent such constraints. […] The potentiality of a speculative attack can force a central bank to act earlier than would otherwise have been optimal absent speculators.

Fazit: Ohne das erwartete QE der EZB hätte man den Schweizer Franken damals wohl nicht so plötzlich entkoppelt.

 

Does U.S. Academic Research Destroy the Predictability of Global Stock Returns?

In the global market, post-sample and post-publication returns diminish by 65% and 73%, respectively, from the in-sample mean. Intriguingly, predictors that demonstrate higher in-sample returns experience a more pronounced reduction in the post-publication phase.

Fazit: Die Studie bestätigt frühere Erkenntnisse, über die ich hier geschrieben hatte.

 

Is Money in Index Funds Smart?

Passive funds with inflows outperform passive funds experiencing outflows, results that are not attributable to naive trend chasing or to flow-induced price pressure. As such, our findings are consistent with the existence of genuine fund picking ability among passive fund investors.

Fazit: Die Fondsauswahl von Indexanlegern scheint tatsächlich smart zu sein.