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  • Tactical Alpha in Theory and Practice (Part II): Principal Component Analysis

    In Part I of this series, we explored Grinold’s Fundamental Law of Active Management, and why the theory leads to misguided conclusions in the presence of asset correlations. In this article we will offer a primer on a useful tool for portfolio evaluation, Principal Component Analysis (PCA), and illustrate how PCA can help quantify the number of independent bets in a…

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  • Experts Aren’t Helpful, and Other Useful Lessons From “DIY Financial Advisor”

    We draw a significant amount of inspiration for the material we cover on this blog from the publications of our financial brethren. Unfortunately, given the non-stop firehouse of information that increasingly characterizes the digital age, it’s nearly impossible to

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  • Tactical Alpha: Theory & Practice (Pt. I) – Fundamental Law of Active Management

    For the overwhelming majority of investors, portfolios are broadly organized into strategic silos of stocks and bonds, such as the ubiquitous 60/40 balanced portfolio. By design, the strategic proportions of stocks and bonds in the portfolio change very little over time. However, within each silo investors take active

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  • Apples and Oranges: A Random Portfolio Case Study

    This article was motivated by a provocative discussion with a thoughtful RIA. Let’s call him Harry. Harry expressed some disappointment with the performance of Global Tactical Asset Allocation (GTAA) strategies over the past few years relative to some popular tactical U.S. sector rotation funds. Harry’s definition of GTAA is any strategy that regularly alters its allocation across a …

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  • Empirical Finance: Meeting Fiduciary Standards Through Skepticism, Not Cynicism

    Michael Edesses is out with a scathing article lambasting the field of empirical finance. He draws inspiration from Harvey, Liu and Zhu’s (HLZ) recent article, entitled “…and the Cross Section of Expected Returns”, but extends HLZ’s conclusions to an absurd limit. In this article, we discuss why we embrace the framework of healthy skepticism described by HLZ, but in the…

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  • All Strategies “Blow Up”

    We are a quantitative finance shop, right down to the ground. All of our portfolios are driven by supervised quantitative models with no discretionary intervention. As such, I was inspired to respond to a recent article on the risk of quant strategies, as I think the way our team approaches quantitative research diverges from how many outsiders perceive quant, and…

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About Us

GestaltU is a forum for research, opinion pieces, and educational material from the team at ReSolve Asset Management. Our views are driven by evidence based finance, with a special focus on asset allocation; factors and smart beta; retirement and endowment strategies, and; quantitative methods.