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Wednesday, June 15, 2016|
Arnott vs Asness
When it comes to timing the market, two factor investing bigwigs recommend that you "sin a little."
Barron's, ETF.com, and InvestmentNews all covered the debate.
In the M* debate Arnott urged advisors and investors to ask "what am I paying for?" and is this strategic beta strategy (favoring value, or momentum, or some other factor) "cheap relative to historic norms". Yet Asness called market timing a sin, and he and Arnott both recommended that investors "sin a little," though Asness said he prefers diversifying among different factor strategies to trying to time one factor or another.
Both Arnott and Asness talked about the importance of behavioral biases, which lead to investors suffering, for example, by buying high and selling.
Other highlights of the debate included: Asness, a former PhD student of Eugene Fama of the efficient market hypothesis fame, declaring himself "courageously in the middle" when it comes to markets' efficiency or lack thereof; Arnott calling value "the granddaddy of all factors"; Asness and Arnott using the word "wedge" to mean completely different things, and Asness apologizing for the confusion; Arnott paraphrasing George Soros to say that "correct investing is painful'; Asness declaring that "the problem is people don't give a crap" about the relative cheapness of value strategies; Arnott responding to the possibility of an all-passive nightmare future by telling an attendee "you've spent 15 years fretting over something that will never happen"; and Arnott pointing out that at the end of 2015 a low-beta strategy would've labeled Amazon, Facebook, and Netflix as low beta.
"I didn't know that," Asness replied. "I pride myself on not knowing what's in our portfolios. I'm a quant."
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