Next Monday night, January 27th, Acropolis will hold our 7th Annual Investor Social. Although we are near capacity, there are some spots, so if you can make it, please call to make a reservation. This week and next, I will include some slides that didn’t make it into the final presentation to keep the event moving but were too good to throw away. I’ve often written here that stocks are… Read More
Take a look at small cap returns last week! Since July 9th, small-cap stocks have risen by about 10 percent, a remarkable run of 16 trading days. Better still, the S&P 500 fell during that time, highlighting the diversification aspect of small caps. One of the pillars of factor investing is that small-cap stocks should outperform large-cap stocks, a phenomenon known as the size premium. From an academic standpoint, there… Read More
One of the most notable market reactions to the election is the rally in small cap stocks. For the month of November, the S&P 600 Small Cap index gained 12.55 percent, compared to a 3.70 percent gain for the S&P 500 index of large cap stocks. It was fourth best month for the S&P 600 Small Cap index since its inception in 1994. While the results were definitely a surprise,… Read More
One of the interesting elements of yesterday’s trading was that small cap stocks continued to pop, jumping 1.59 percent. I don’t have a particular explanation for this movement, but it’s significant enough that I think it’s worth mentioning and it’s an example of positive volatility. Too often we think of volatility to the downside, but the movement in small cap stocks in the past few days is a good reminder… Read More
You may have noticed that the small cap index in the table above, the Russell 2000, has been gaining ground recently on the S&P 500, the benchmark index for large cap stocks. The chart below shows the return for the Russell 2000 (in orange) as nearly caught up with the S&P 500 (in blue). The return difference, as we can see in the table is just one-third of one percent,… Read More
Barron’s cover article this weekend featured AQR, one of the fund companies that we use. You can find the article here, but a subscription is required. The article was great, really explaining the firm and many of their processes – so much so that one of the online commenters asked, ‘what is this, an ad?’ My only disappointment was that the article really highlighted their alternative mutual funds, strategies like managed futures… Read More
Value stocks are undoubtedly having a tough time these days. As I first wrote last November (click here for the article), value stocks are undergoing their worst period of underperformance since the tech bubble during the late 1990s. For the 10 years ending January 31st, the Russell 1000 Value index is up 7.03 percent compared to 7.92 percent for the Russell 1000 index of large cap stocks and 8.68 percent… Read More
A number of people have noted that small cap stocks are really strong this year, as you can see from the chart below. I want to illustrate this outperformance a little differently in the chart below, which requires a little explaining. In the first chart above, I showed what a dollar invested in each index would have turned into. Although you can’t invest a dollar in anything, let alone an index… Read More
The other night while washing the dishes, I had the thought that St. Louis is a mid-cap, meaning that the size of our fine city is roughly equivalent to a mid-sized US company. It’s a weird thought, but I thought it would be fun to carve up US cities the same way that researchers carve up the capitalization of the stock market. I started at Wikipedia with a list of… Read More
In recent weeks, I’ve written about the various risk premiums that have been found in academia that both explain returns and offer some hope of beating the market. Each time, I wished that I could link back to an article that explains the concept more fully, so today, I am going to write the first of a series of articles explaining the well-known risk premiums. First up is the size… Read More
