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ETFs & Portfolio Strategy Articles on Seeking Alpha

ETFs & Portfolio Strategy Articles on Seeking Alpha © seekingalpha.com. Use of this feed is limited to personal, non-commercial use and is governed by Seeking Alpha’s Terms of Use (http://seekingalpha.com/page/terms-of-use). Publishing this feed for public or commercial use and/or misrepresentation by a third party is prohibited. SeekingAlpha.com http://seekingalpha.com Upgrade Your Fundamental Stock P/E Valuations With Behavioral Stock P/X Valuations http://seekingalpha.com/article/3966238-upgrade-fundamental-stock-p-e-valuations-behavioral-stock-p-x-valuations?source=feed_tag_etf_portfolio_strategy 3966238 Tue, 19 Apr 2016 10:47:40 -0400 AAPL SPY IVE SH SSO VOO SDS IVV SPXU UPRO SPXL RSP SPXS SPYG RWL VFINX EPS IVW SPYV RPG RPV VOOG VOOV SPLX SFLA FTA SPUU DHVW LLSP CAPX RYARX Peter F. Way, CFA Invest In Asia, Healthcare To Reduce Your Correlation To Oil Prices http://seekingalpha.com/article/3966194-invest-asia-healthcare-reduce-correlation-oil-prices?source=feed_tag_etf_portfolio_strategy 3966194 Tue, 19 Apr 2016 09:00:53 -0400 USO OIL UWTI UCO DWTI SCO BNO DBO DTO USL GRX VPL IRY IXJ DNO AIA BME OLO SZO THW OLEM ADRA IPAC RFAP ValueWalk GaveKal Capital Team Eric Bush, CFA Finding A New Balance With Alternatives http://seekingalpha.com/article/3966178-finding-new-balance-alternatives?source=feed_tag_etf_portfolio_strategy 3966178 Tue, 19 Apr 2016 08:29:58 -0400 DIA QQQ IWM SPY BMO Global Asset Management Best-Performing Value Strategies – Conclusion: Crowning The Winning Strategy http://seekingalpha.com/article/3966165-best-performing-value-strategies-conclusion-crowning-winning-strategy?source=feed_tag_etf_portfolio_strategy 3966165 Tue, 19 Apr 2016 07:45:22 -0400 CMA PRU IWV SPY Collin Moshman Nuveen Tax Free CEF Mergers Now Completed – Lets Look At The Results http://seekingalpha.com/article/3966143-nuveen-tax-free-cef-mergers-now-completed-lets-look-results?source=feed_tag_etf_portfolio_strategy 3966143 Tue, 19 Apr 2016 05:43:08 -0400 NIO NVG NPT NZF Alan Schmerler A Strategy With A 3.42 Sharpe Ratio This Year http://seekingalpha.com/article/3966133-strategy-3_42-sharpe-ratio-year?source=feed_tag_etf_portfolio_strategy 3966133 Tue, 19 Apr 2016 04:38:30 -0400 SPY TMF SPLV Harry Long Insider Ownership: The Perfect Stock Signal? http://seekingalpha.com/article/3966132-insider-ownership-perfect-stock-signal?source=feed_tag_etf_portfolio_strategy 3966132 Tue, 19 Apr 2016 04:35:01 -0400 SPY Michael Boyd What’s Your Smart Grid I.Q.? http://seekingalpha.com/article/3966024-smart-grid-q?source=feed_tag_etf_portfolio_strategy 3966024 Mon, 18 Apr 2016 16:09:22 -0400 SSNI OPWR RDEIF ENPH NGG NGKIF NIPNF PCRFF PRYMF PWR SBGSF SGPEF SMAWF SMTGF TOSBF VMI WCC GRID Accendo Markets 3 Closed End Funds That Are Poised To Outperform AMLP http://seekingalpha.com/article/3966032-3-closed-end-funds-poised-outperform-amlp?source=feed_tag_etf_portfolio_strategy 3966032 Mon, 18 Apr 2016 15:58:32 -0400 CBA MIE FMO AMLP Arbitrage Trader MORL: Dividend Yield Of 22.4% Makes It Still Interesting http://seekingalpha.com/article/3966015-morl-dividend-yield-22_4-percent-makes-still-interesting?source=feed_tag_etf_portfolio_strategy 3966015 Mon, 18 Apr 2016 15:45:56 -0400 AGNC ARR BRK.A BRK.B CY HTS MORT MRRL NLY PMT MORL Lance Brofman How To Identify A Stock With A Competitive Advantage: Cross Your Fingers http://seekingalpha.com/article/3966023-identify-stock-competitive-advantage-cross-fingers?source=feed_tag_etf_portfolio_strategy 3966023 Mon, 18 Apr 2016 15:39:04 -0400 NFLX AAPL Mitchell Mauer VDC: Market Catching Up To Consumer Staples http://seekingalpha.com/article/3965998-vdc-market-catching-consumer-staples?source=feed_tag_etf_portfolio_strategy 3965998 Mon, 18 Apr 2016 14:08:53 -0400 PEP VIG VOO VDC ColoradoWealthManagementFund Vanguard Growth And Income Fund: It Hasn’t Been Able To Beat The S&P 500 For A Good Reason http://seekingalpha.com/article/3965997-vanguard-growth-income-fund-able-beat-s-and-p-500-good-reason?source=feed_tag_etf_portfolio_strategy 3965997 Mon, 18 Apr 2016 14:06:03 -0400 AAPL SPY XOM VQNPX ColoradoWealthManagementFund Beyond Miners, 5 ETFs Crushing The Market To Start Q2 http://seekingalpha.com/article/3965993-beyond-miners-5-etfs-crushing-market-start-q2?source=feed_tag_etf_portfolio_strategy 3965993 Mon, 18 Apr 2016 13:25:58 -0400 SBIO USWD RORO BNO XOP Zacks Funds U.S. Fund Flows: Investors Pull $7.4 Billion From U.S. Funds http://seekingalpha.com/article/3965987-u-s-fund-flows-investors-pull-7_4-billion-u-s-funds?source=feed_tag_etf_portfolio_strategy 3965987 Mon, 18 Apr 2016 13:18:00 -0400 SPY DIA QQQ Lipper Alpha Insight Oil And Energy ETFs To Watch Ahead Of Output Freeze Meeting http://seekingalpha.com/article/3965976-oil-energy-etfs-watch-ahead-output-freeze-meeting?source=feed_tag_etf_portfolio_strategy 3965976 Mon, 18 Apr 2016 12:51:17 -0400 BNO USO OIL PSCE XOP FXN Zacks Funds Rethink Your International Allocations http://seekingalpha.com/article/3965973-rethink-international-allocations?source=feed_tag_etf_portfolio_strategy 3965973 Mon, 18 Apr 2016 12:45:26 -0400 WisdomTree ​7 Reasons Why SunEdison Was Doomed To Fail​​ http://seekingalpha.com/article/3965967-7-reasons-sunedison-doomed-fail?source=feed_tag_etf_portfolio_strategy 3965967 Mon, 18 Apr 2016 12:32:30 -0400 AMZN GOOGL TSLA GOOG FB PYPL MSFT AAPL SUNE Jae Jun Why To Ride The Gold Bull http://seekingalpha.com/article/3965933-ride-gold-bull?source=feed_tag_etf_portfolio_strategy 3965933 Mon, 18 Apr 2016 11:18:59 -0400 GLD David Pinsen The V20 Portfolio – Week #28 http://seekingalpha.com/article/3965940-v20-portfolio-week-28?source=feed_tag_etf_portfolio_strategy 3965940 Mon, 18 Apr 2016 11:02:10 -0400 CONN DXMM SAVE SPY The Traveling Investor

Realized Risk And Returns In Developed Markets

By Baijnath Ramraika, CFA In a paper I co-authored with Prashant Trivedi, we constructed all stock market-cap weighted indices for each one of the twenty-three developed markets included in the MSCI Developed Markets Index as of December 31st, 2014. In the paper, we showed each country’s all-stock index in U.S. dollars as well as local currency terms and also reported the number of companies that were included in the country’s index every year. Every country’s annual local currency returns and the annualized standard deviation of these returns were plotted on a scatter graph. A line of best fit was drawn to check if investors were compensated for the risk they took, i.e., did higher risk as defined by standard deviation of returns correspond with higher returns. Figure 1 below shows this relationship with returns on y-axis and risk on x-axis. Note that returns for the purposes of this chart have been defined as arithmetic average of annual returns. As is seen, the line is upward sloping, i.e., higher the risk, higher the return. Figure 1 (click to enlarge) Developed Markets – Risk vs. Arithmetic Returns So does that mean that markets were efficient in the sense that high returns are accompanied with high risk. Not so fast. Remember, I pointed out earlier that Figure 1 was based on arithmetic average of annual returns. This is where you have to pay attention. An important quirk here relates to the fact that equity markets tend to produce negative returns every once a while. Consider a simple hypothetical problem with two year investment returns being +50% in Year 1 and -50% in Year 2. If you invested $100 at the beginning of Year 1, you will end Year 1 with $150 (+50% return). The 50% loss in the second year means that you will end Year 2 with $75, i.e., at the end of the Year 2, your cumulative loss is -25%. However, the arithmetic average of the two annual numbers is 0% [(+50%-50%)/2]. The lesson here is that if there are negative returns in any of the measurement periods, arithmetic average overstates investment performance. Figure 2 below shows the relationship between realized risk and returns in developed markets, similar to Figure 1. However, instead of using arithmetic average, Figure 2 uses geometric average of annual returns. Interestingly, the upward slope has given way to a slight downward slope with the distribution around the line of best fit widening substantially. (click to enlarge) Developed Markets – Risk vs. Geometric Returns While the correlation between risk and arithmetic average return as plotted in Figure 1 was positive at +34%, the correlation between risk and geometric average return as plotted in Figure 2 is negative at -6%. In fact, the correlation is so low as to suggest that realized returns had no relationship with realized risk. That’s another way of saying that higher risk did not translate in higher returns.