In a recent article, French (2017) describes an intriguing property of Markowitz (1959) optimization.  He notes that the Markowitz optimizer (nearly) always populates the efficient frontier with a relatively small subset of the securities in the optimization universe.  Is the optimizer telling us something important about the investment value of the...

It is a common academic mantra, and of many respected investment professionals, that investing in an index fund is best for the majority of investors.  There are two reasons for this view: 1) Experience has shown that active investment strategies charge more and perform less well on average relative to many common index funds; 2) Twentieth century financial...

Our January commentary (1/3/17) discussed some critiques of index-fund ETFs topical in the investment community.  The argument was that ETFs, because they trade like stocks, tend to encourage investors to trade actively as opposed to traditional mutual fund investing.  But it is always true that anything can be misused however otherwise beneficial.  In our view...

Widespread investment wisdom dictates that there are two “irrational” tendencies of human behavior that harm investment performance when acted on excessively: greed and fear. In a simple sense, “greedy” investors want maximum participation in rising markets and “fearful” investors want minimum participation in falling markets. Upside and downside capture...

The Dow finally hit 20,000.  I wouldn’t ordinarily put much importance on an arbitrary milestone (see The Dow 20,000...Should We Care?), but the long hover just below this level was extraordinary.  This is not to say that markets need behave in any predictable manner.  Daily movements of the market tend to behave like random walks, and random walks commonly...

“Dow 20,000”

Those two words encapsulate three concepts: 1) the Dow is a relevant economic indicator; 2) 20,000 is a noteworthy milestone; 3) special consideration should be given to investing at all-time highs.  I’ll examine each in turn...

By Paul Erlich

New Frontier Advisors creates and maintains diversified investment solutions for long-term wealth accumulation and preservation. Clients and advisors often raise concerns about individual assets or asset classes held in these portfolios – concerns that are based on looking at the performance, or attempting to assess the potential dangers, of those...

Factor models are hugely important to the finance industry. These risk models provide tremendously useful information to investors and managers by estimating the risk of any portfolio of stocks, and the models have also been extended to other asset classes such as bonds and commodities. The consensus of most current econometric thinking is that a sizable part of...

There has been much discussion and speculation of the political and economic consequences of yesterday’s vote for the UK to leave the European Union.  Ignoring politics altogether, and anything speculative about economics or financial markets, what can be said based on probability, financial theory, and an...

By New Frontier

Given great interest in the DOL decision on fiduciary responsibility, we note a blog posted in 2012 by James Watkins that referenced New Frontier’s patented optimization process followed by a comment by noted expert Steve Winks that we quote below: “…[T]here is massive push back from the brokerage industry, which neither acknowledges nor supports the fiduciary standing of brok ...