Darren 🥚 Profile picture
Feb 4 9 tweets 4 min read
1/ Modern Endowment Story: A Ubiquitous United States Equity Factor (Ennis)

"Endowments' overwhelming exposure to the U.S. equity market over the most recent 5–7 years raises important questions regarding risk tolerance and diversification."

papers.ssrn.com/sol3/papers.cf…
2/ Over the most recent six years, the NACUBO equal-weighted composite of large endowments has had a beta to the benchmark of 1.0 and R² of .998. This is a dazzlingly tight fit, considering that the independent variables are restricted to fully investable, broad market indexes."
3/ "The U.S. equity market risk premium is embedded in the principal asset classes that endowments employ. (I make no attempt to adjust for the return smoothing characteristic of private markets. The correlations and betas would no doubt be greater if I had done so.)"
4/ "U.S. equity market beta has been an important driver of return across the board — in public markets and private; in hedge funds; in real estate; in U.S. and non-U.S. equities; and in some segments of fixed income."
5/ "The trend toward smaller fixed-income allocations and lower creditworthiness are consistent with the crowding out of the Aggregate bond index evident in Exhibit 2. That is, reported fixed income allocations have declined, and what remains has become more equity-like."
6/ "Exhibit 6 shows regression statistics of the composite relative to benchmark with the index weights shown in Exhibit 2.

"For the last six years, alpha reaches a value of -4.2% with a t-statistic of -8.4: an extraordinary degree of statistical significance."
7/ "The endowment composite’s Sharpe ratio of .67 is approximately 70% as large as those of the other two return series. In other words, the opportunity cost experienced by the endowment composite is approximately 30% of the risk premium available during the period."
8/ "The margin of underperformance reported here, about 4% per year, exceeds the upper end of the range of their estimated cost by about one percentage point per year. I find this result a bit puzzling unless the cost estimate is low."
9/ "Funds’ home-country bias takes on added importance in light of extraordinary valuation levels.

"At CAPE of 37, investors buying U.S. equities are paying 54% more for earnings than are investors in other markets. Endowments are paying up heavily to bet on their home market."

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More from @ReformedTrader

Feb 4
1/ A Wandering Mind is an Unhappy Mind (Killingsworth, Gilbert)

"A human mind is a wandering mind; a wandering mind is an unhappy mind. The ability to think about what is not presently happening is a cognitive achievement that comes at an emotional cost."
wjh-www.harvard.edu/~dtg/KILLINGSW… Image
2/ " “Stimulus-independent thought” or “mind wandering” appears to be the brain’s default mode and allows people to learn, reason, and plan.

"Unfortunately, collecting real-time reports as people go about their daily lives is cumbersome and expensive.
3/ "Such experience sampling has rarely been used to investigate the relationship between mind wandering and happiness and has always been limited to very small samples.

"We solved this problem by developing aWeb application for the iPhone that contacts people at random moments.
Read 13 tweets
Feb 4
1/ The Great Inflation, Factors, and Stock Returns (Stanhope)

"Equities as a whole may not welcome high rates of inflation, but certain stock selection factors have shown resilience in periods of rising prices."

canvas.osam.com/Commentary/Blo…
2/ "During the Great Inflation era (1965-1982), inflation annualized at 6.5%. While comparisons to our current situation are tempting, the structure of the global economy and monetary, fiscal, energy, and labor policies are dramatically different."
3/ "Inflation is a ‘tax’ on revenues, not profits.

"High taxes in high-inflation regimes can push the effective tax rate above 100%, leading corporations to rack up expenses to reduce pre-tax profits.

"Current corporate tax rates should not exacerbate inflationary forces."
Read 7 tweets
Feb 3
1/ Putting a price tag on friends, relatives, and neighbours (Powdthavee)

"Using the British Household Panel Survey, I find that an increase in the level of social involvements is worth up to an extra £85,000 a year in terms of life satisfaction."

researchgate.net/publication/22… Image
2/ "While there is substantial evidence that people with strong social ties tend to report higher levels of happiness and satisfaction, this article will be one of the first to compare this impact to the impacts other occurrences in our lives." ImageImageImageImage
3/ "Think of a person who derives satisfaction from spending time with friends and also enjoys money. In principle, it is be possible to calculate exactly how the time spent with friends is worth in terms of income: a valuation for social relationships." Image
Read 21 tweets
Feb 3
1/ Evidence for Community Cloth Face Masking to Limit the Spread of SARS‐​CoV‑2: A Critical Review (Liu, Prasad, Darrow)

"The clinical evidence of mask efficacy is of low quality. The best available clinical evidence has mostly failed to show efficacy."

cato.org/working-paper/… Image
2/ "Aerosol transmission has been demonstrated or is considered likely for SARS-CoV, Middle East Respiratory Syndrome (MERS), H1N1, & respiratory syncytial virus. A growing body of laboratory, animal, & clinical evidence suggests SARS-CoV-2 is also spread via this mechanism." ImageImage
3/ "Most studies evaluating as-worn efficacy compare the number of particles collected inside/outside a mannequin head’s mask. Under these conditions, cloth masks have highly variable filtration qualities.

"Surgical masks outperform cloth masks but still have variable results." Image
Read 23 tweets
Feb 2
1/ When Genius Failed: The Rise and Fall of Long-Term Capital Management (Roger Lowenstein)

"If there was one article of faith that John Meriwether had discovered at Salomon Brothers, it was to ride your losses until they turned into gains."

amazon.com/When-Genius-Fa… Image
2/ "He often bet that a spread—say, between a futures contract and the underlying bond, or between two bonds—would converge.

"Occasionally, other investors might get scared and withdraw, causing spreads to widen further and causing Meriwether to lose money, at least temporarily.
3/ "But if he had the capital to stay the course, he’d be rewarded in the long run, or so his experience seemed to prove. Eventually, spreads always came in; that was the lesson he had learned from the Eckstein affair, and it was a lesson he would count on, years later, at LTCM.
Read 32 tweets
Feb 2
1/ COVID-19 Vaccination in Children and University Students (Ioannidis)

"Given the extremely low rates of COVID-19 fatalities and of vaccine fatalities in children and adults under the age of 29, nonfatal outcomes matter a lot in decision-making."

onlinelibrary.wiley.com/doi/pdf/10.111… Image
2/ "773 U.S. college campuses as of August 24, 2021 have issued vaccination requirements for at least some students or employees, but details, target groups and stringency of rules vary remarkably.

"European universities generally encourage vaccination without mandating it."
3/ "Young people can be major drivers of active epidemic waves (in terms of their share in numbers of documented cases). However, opposite arguments also exist, e.g. that vaccinating the youngest age strata may shift infection to higher ages with higher case fatality." Image
Read 12 tweets

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