Publications by klr
A Tale of Two Frontiers
In a follow up to Evolving Domestic Frontier, I wanted to explore the efficient frontier including international indexes since 1980. Life is great when your primary indexes (Barclays Aggregate and S&P 500) lie on the frontier as they did 1980-1999. The situation becomes much more difficult with a frontier like 2000-now. From TimelyPortfo...
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With Size, Does Risk–>Return?
A basic tenet in finance is that higher risk should lead to higher return as the time horizon stretches to infinity. However, in bonds, higher risk has not meant higher return with either credit risk (high-yield) or long duration risk (maturity > 15 years). Based on some quick analysis of Kenneth French’s dataset on returns by market capita...
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Lattice Explore Bonds
Since my fifth most popular post has been Bond Market as a Casino Game Part 1, I thought I would use Vanguard Total US Bond Market mutual fund (VBMFX) monthly returns to build our skills in the lattice R package and help visualize the unbelievable run of U.S. bonds (Calmar Ratio 1.37 over the past 20 years). Although I have primarily graphed with...
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Record Long Term Treasury Returns
I mistakenly assume everyone knows that US Treasury Returns have been extreme in 2011. As we near the end of the year, I thought it would be beneficial to look at the world’s best performer while incorporating some new graphical techniques. There is also an opinion (NOT INVESTMENT ADVICE) expressed in one of the charts. From TimelyPort...
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Extreme Bond Returns
20 years of data is nowhere near enough to satisfy my insatiable appetite for bigger datasets. While I showed Record Long Term Treasury Returns with Vanguard’s US Long Treasury mutual fund, its 20 year life is not sufficient to give me comfort risking money. What happens when we take the Moody’s AAA rate series dating back to 1919? My opi...
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R in Axys (Impossible Dream)
It has always been a dream of mine to incorporate R graphs and analysis in an Advent Axys report. The unbelievable work from the guys at Statconn http://rcom.univie.ac.at/ make this dream possible. If we use the same perhstsp.rep created for Better Bullets, and then apply a little Excel macro magic excelgrf_macros.xlsm with help from RExcel a...
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Survey Time
After I completed the vignette survey http://lamages.blogspot.com/2012/01/feedback-from-vignette-survey.html, I was amazed with the process, functionality, and potential R integration from Google Docs forms. I just had to make one of my own. As I try to say in each post, I love comments, suggestions, and feedback. Please let me know what you ...
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Quick Update on the Components of Bond Returns
In Real Squeeze, -1% Guaranteed Real Real Return! Yummy??, and Historical Sources of Bond Returns, I offer some historical perspective on the only sources of bond returns: inflation, real returns, and credit. Assuming no credit risk in US Treasuries (probably not a good assumption given this Bloomberg quote on CDS on US Treasuries), the formula...
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Stocks When Bonds are Extreme
In Extreme Bond Returns, I did not consider the context of extreme bond returns, so let’s examine annual returns for the Dow Jones Industrial Average when bonds experience extreme annual returns. I was very surprised that stocks performed extremely well when bonds also did extremely well. Unfortunately, 6 of the 8 periods all occurred durin...
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Are We Japanese?
Most of the discussion trying to determine if the U.S. is Japan 20 years later focuses on the economy and the stock market. However, one of the biggest and most persistent correlations between Japan and the U.S. are the Japanese Yen and the U.S. 10 Year Treasury Yield. I think it is essential to really try to explore this relationship to help...
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