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A Closer Look at the Market Premium

This blog is the second in a four-part series on factors of return. A review of the historical results of the market premium may help provide advisors context for client conversations about performance. (The market premium is defined as the incremental return of a broad based market index over a proxy for the risk free rate.) Over short periods we’ve observed a volatile U.S. market premium. The standard deviation of the U.S. market premium over one-year periods, rolling one month
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Evaluating Factors of Expected Return

This blog is the first in a four-part series on factors of return. Research has identified approximately 316 new factors in the academic literature from 1964 through 2013(1), so how can we be sure that the factors above are the ones we should be using to construct our portfolios? To review, factors are independent variables in an equation, or model, which help to explain asset prices. In the seminal Fama-French three factor asset pricing model, the three variables, or factors,
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