That doesn’t matter though. The portfolio has different properties as a result of the selection process. a random selection is a random selection and will approximate the market factor. Explicitly choosing such that you get a value tilt gives you a value tilt.But again, any random selection of stocks, or any sector overweight, is different from the market. But what you've got as a whole isn't inherently any more or less diversified. It's just a customised weighting of the same stocks.I completely disagree. Having some factor load even if long-only, is still a factor load that is different from the market weightYes, but those aren't really diversifying you. It's High-minus-low (long/short) that generates this apparently more market neutral return.I mean I hold 2 ETFs and have a tilt to long-only value. It's far from equal weight and from from complicated.
I don't think that's diversification. You could divide stocks along every line, and rebalance, and probably all you'd wind up with is a very complex implementation of an Equal-weight portfolio.
The market beta in my portfolio is around 1, I am not leveraging the market factor.
My factor loads are probably around 1.0 to market, and 0.2-0.25 to value, and 0.15-0.20 to size
It's like adding coriander to a curry powder. You're adding more of something that's already there. OR you're reducing everything that's not that. It feels like you're adding something, but really you're just changing ratios .. You could say you're less concentrated in a few big tech stocks – but Berkshire Hathaway thought it wise to put nearly half their public stock portfolio in one of the biggest, and it won't have been a flippant decision.
One of them is a value tilt and the other is a market portfolio plus noise.
This is tautological
Statistics: Posted by muffins14 — Wed Mar 20, 2024 8:32 pm — Replies 504 — Views 35746