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ETFs have come a long way since the S&P 500 SPDR dominated the field. One of the many innovations in this area has been its internationalization. The proliferation of non-U.S. ETFs now makes it easy for any investor to get as much or as little well-diversified exposure as he or she wishes to just about any major world markets. So naturally, there's much temptation to try to rotate a portfolio from one country to another depending on what's hot and what's not. Full Article »
Tue Jun 30, 2009 By Marc Gerstein
We hear about sector rotation all the time when we tune into the financial media. Energy is hot, consumer is not. There's profit-taking in health care and rotation into cyclicals. Etc., etc., etc. So how could any ETF investor with access to screening, ranking and backtesting resist the temptation to create a sector-rotation model. Full Article »
Do you remember when mutual funds were new, and there was just one investment style; stocks? Perhaps not. That was a long time ago. In any case, we've come a long way since then. We have different asset classes, global stocks, and even within U.S. stocks, we have large cap, mid cap, small cap, growth, value, core, and income. So even those who just want U.S. stocks have to make some important allocation decisions. And naturally, there is great temptation to look for protocols that will help identify which styles are likely to rotate into and out of favor. Full Article »
For more than half a century, financial theorists have been talking incessantly about the importance of balancing returns against the accompanying risks. But for much of that time, especially in recent years, many investors ignored that topic. Risk-control was seen as a handicap, an annoying drag on portfolio performance. One would think, or at least hope, that the experience of 2007-08 would have driven home the point that risk really does matter, not just in the ivory towers of academia but in the real world as well. Here are two variations of a strategy designed to identify ETFs that have been posting the strongest returns relative to the amount of risk in their portfolios. Full Article »
With ETFs, as with other kinds of funds (i.e., open-and closed-end mutual funds, hedge funds), it's tempting to look at past price performance when trying to decide which ones are most likely to perform well in the future. There are many who advise against doing that, suggesting that yesterdays winners can become tomorrow's losers. Yes, it's true. That can happen, but this doesn't always occur. In fact, there's plenty of room for well-constructed ETF momentum models. Full Article »
