Variations of Dual momentum
"There's a few layers to the Momentum Theory discussed in that book. But speaking in general terms I can answer the following: Kind of. Assuming you understand that historically the Nasdaq has seen a little more volatility than the S&P. And, more importantly, that it tends to track the tech sector more than the general economy.  Thus the pitfall is that it is heavily weighted towards (and often tracks) the performance of a few stocks including: Apple, Google (Alphabet), Microsoft, Amazon, Intel and Amgen.  It could be argued this is counter intuitive to the general strategy you are trying to employ. This could be tougher to justify.  The reason it is potentially not a great idea has less to do with the fact that gold has factors other than just risk on/off and inflation that affect its price (even though it does!); but more to do with the fact that it is harder to own gold and move in and out of positions efficiently than it is a bond index fund.   For example, consider buying physical gold.  To do so you have to spend some time evaluating the purchase, you are usually paying a slight premium above the spot price to purchase it, and you should usually also have some form of security or insurance for it.  So, it has additional costs.  Possibly worth it as part of a long-term investment strategy; if you believe gold will appreciate over a decade. But not so much if you are holding it for as little as a few weeks and constantly moving in and out of the position over the year. The same is true to some extent of investing in gold in the form of an ETF.  At least a portion of ""their gold"" comes from paper or futures contracts which must be rolled every month.  This creates a slight inefficiency.  While possibly not a deal breaker, it would not be as attractive to someone trading on momentum versus fundamentals in my opinion. In the end though, I think all strategies are adaptable.  And if you feel gold will be the big mover this year, and want to use it as your risk hedge, who am I or anyone else to tell you that you shouldn't."
Not really. You can have two bonds that have identical duration but vastly different convexity.   Pensions and insurance portfolio managers are most common buyers as they're trying to deal with liability matching and high convexity allows them to create a barbell around their projected liabilities. "This is the best tl;dr I could make, [original](http://cep.lse.ac.uk/pubs/download/dp1503.pdf) reduced by 99%. (I'm a bot) ***** &gt; Alternative risk outcomes All risk outcomes capture ex-post risk realizations rather than ex- ante risks.  &gt; 4.8 1.2 1.6 Figure 2: Positive Correlation Tests - Dynamics t+1 t+2 t+3 t+4 t+5 t+6 Displacement Probability in Year t+k t+7 t+8 Notes: Risk realization in t + 1 may fail to fully capture the unemployment risk faced by an individual as she is making her coverage choice at time t, which justifies using risk realizations for that individual further into the future.  &gt; 05 Individual-level model &amp;beta;OLS =.082 &amp;beta;2SLS =.245 0.05.1.15 Firm Displacement Risk in t.2 Notes: The Figure uses cross-sectional variation in displacement risk across firms as a risk shifter to estimate how UI coverage choices react to variation in risk that is not driven by individual moral hazard.   ***** [**Extended Summary**](http://np.reddit.com/r/autotldr/comments/76t73y/lse_riskbased_selection_in_unemployment_insurance/) | [FAQ](http://np.reddit.com/r/autotldr/comments/31b9fm/faq_autotldr_bot/ ""Version 1.65, ~229382 tl;drs so far."") | [Feedback](http://np.reddit.com/message/compose?to=%23autotldr ""PM's and comments are monitored, constructive feedback is welcome."") | *Top* *keywords*: **risk**^#1 **coverage**^#2 **individual**^#3 **work**^#4 **selection**^#5" Something like cost = a × avg_spreadb + c × volatilityd × (order_size/avg_volume)e. Different brokers have different formulas, and different trading patterns will have different coefficients. So I did some queries on Google Scholar, and the term of art academics seem to use is target date fund. I notice divided opinions among academics on the matter. W. Pfau gave a nice set of citations of papers with which he disagrees, so I'll start with them. In 1969, Paul Sameulson published the paper Lifetime Portfolio Selection By Dynamic Stochaistic Programming, which found that there's no mathematical foundation for an age based risk tolerance. There seems to be a fundamental quibble relating to present value of future wages; if they are stable and uncorrelated with the market, one analysis suggests the optimal lifecycle investment should start at roughly 300 percent of your portfolio in stocks (via crazy borrowing). Other people point out that if your wages are correlated with stock returns, allocations to stock as low as 20 percent might be optimal. So theory isn't helping much. Perhaps with the advent of computers we can find some kind of empirical data. Robert Shiller authored a study on lifecycle funds when they were proposed for personal Social Security accounts. Lifecycle strategies fare poorly in his historical simulation: Moreover, with these life cycle portfolios, relatively little is contributed when the allocation to stocks is high, since earnings are relatively low in the younger years. Workers contribute only a little to stocks, and do not enjoy a strong effect of   compounding, since the proceeds of the early investments are taken out of the stock   market as time goes on. Basu and Drew follow up on that assertion with a set of lifecycle strategies and their contrarian counterparts: whereas a the lifecycle plan starts high stock exposure and trails off near retirement, the contrarian ones will invest in bonds and cash early in life and move to stocks after a few years. They show that contrarian strategies have higher average returns, even at the low 25th percentile of returns. It's only at the bottom 5 or 10 percent where this is reversed. One problem with these empirical studies is isolating the effect of the glide path from rebalancing. It could be that a simple fixed allocation works plenty fine, and that selling winners and doubling down on losers is the fundamental driver of returns. Schleef and Eisinger compare lifecycle strategy with a number of fixed asset allocation schemes in Monte Carlo simulations and conclude that a 70% equity, 30% long term corp bonds does as well as all of the lifecycle funds. Finally, the earlier W Pfau paper offers a Monte Carlo simulation similar to Schleef and Eisinger, and runs final portfolio values through a utility function designed to calculate diminishing returns to more money. This seems like a good point, as the risk of your portfolio isn't all or nothing, but your first dollar is more valuable than your millionth. Pfau finds that for some risk-aversion coefficients, lifecycles offer greater utility than portfolios with fixed allocations. And Pfau does note that applying their strategies to the historical record makes a strong recommendation for 100 percent stocks in all but 5 years from 1940-2011. So maybe the best retirement allocation is good old low cost S&P index funds! The methodology for divisor changes is based on splits and composition changes. Dividends are ignored by the index. Side note - this is why, in my opinion, that any discussion of the Dow's change over a long term becomes meaningless. Ignoring even a 2% per year dividend has a significant impact over many decades.  The divisor can be found at http://wsj.com/mdc/public/page/2_3022-djiahourly.html Here is a list of threads in other subreddits about the same content:   * [An alternative entrepreneur principle. | The Dismal Science](https://www.reddit.com/r/Economics/comments/79fl0a/an_alternative_entrepreneur_principle_the_dismal/) on /r/Economics with 1 karma (created at 2017-10-29 17:13:29 by /u/The_man_who_sold)  ----   ^^I ^^am ^^a ^^bot  ^^[FAQ](https://www.reddit.com/r/DuplicatesBot/wiki/index)-[Code](https://github.com/PokestarFan/DuplicateBot)-[Bugs](https://www.reddit.com/r/DuplicatesBot/comments/6ypgmx/bugs_and_problems/)-[Suggestions](https://www.reddit.com/r/DuplicatesBot/comments/6ypg85/suggestion_for_duplicatesbot/)-[Block](https://www.reddit.com/r/DuplicatesBot/wiki/index#wiki_block_bot_from_tagging_on_your_posts)  ^^Now ^^you ^^can ^^remove ^^the ^^comment ^^by ^^replying ^^delete! If we assume constant volatility, gamma increases as the stock gets closer to the strike price. Thus, delta is increasing at a faster rate as the stock reaches closer to ITM because gamma is the derivative of delta. As the stock gets deeper ITM, the gamma will slow down as delta reaches 1 or -1 (depends if a call or a put). Thus, the value of the option will change depending upon the level of the delta. I am ignoring volatility and time for this description.  See this diagram from Investopedia: Gamma I understand that ITM have little time value, so they will have small time decay(theta), but why OTM has a lesser theta than ATM? The Time value represents uncertainty.  That uncertainty decreases the farther away from ATM you get (in either direction).  At-the-money, there is roughly a 50% chance that the option expires worthless. As you get deeper in-the-money, the change that is expires worthless decreases, so there is less uncertainty (there is more certainty that the option will pay off).  As you go deeper OTM, the probability that the option expires worthless increases, so there is also less uncertainty. At the TTM decreases, the uncertainty (theta) decreases as well, since there is less time for the option to cross the strike from either direction.  Similarly, as volatility decreases, theta decreases, since low-volatility stocks have a less change of crossing the strike. "1. (a) ""Stephen Kinzer: The True Flag of American Empire #051"" by Guadalajara Geopolitics Institute, published on 14 June 2017: http://guadalajarageopolitics.com/2017/06/14/stephen-kinzer-true-flag-american-empire-051/      YouTube link: https://www.youtube.com/watch?v=qXSMHR-sN1s      SoundCloud link: https://soundcloud.com/guadalajara-geopolitics/stephen-kinzer-the-true-flag-of-american-empire-051      Stephen Kinzer: http://stephenkinzer.com      (b) Read https://www.reddit.com/r/worldpolitics/comments/6feg5x/putin_interview_did_russia_interfere_in_the/dihhtkq      (c) ""The CIA's Holy War: No espionage operation or covert action was deemed too extreme by a CIA that saw only friends or enemies"" by Stephen Kinzer, published in the June 2016 issue of American History: http://watson.brown.edu/news/2016/cias-holy-war-written-stephen-kinzer       PDF: [http://watson.brown.edu/files/watson/imce/news/2016/CIA's Holy Cold War Kinzer.pdf](http://watson.brown.edu/files/watson/imce/news/2016/CIA%27s%20Holy%20Cold%20War%20Kinzer.pdf)      American History magazine: http://www.historynet.com/magazines/american-history-magazine       (d) ""Covert Action: A Systems Approach"" by Kristen N. Wood, published December 2014: http://calhoun.nps.edu/bitstream/handle/10945/44692/14Dec_Wood_Kristen.pdf      Source: http://hdl.handle.net/10945/44692  2. Read https://www.reddit.com/r/worldpolitics/comments/5b9bza/the_political_system_of_the_usa_is_characterised/d9mq22q          Source: #1 at https://www.reddit.com/r/worldpolitics/comments/5bpc5x/an_update_for_my_readers_by_peter_levenda/d9q9006      Via: #26 at https://www.reddit.com/r/Missing411/comments/41oph0/supernatural_abductions_in_japanese_folklore_by/cz3we2z  3. ""Jasun Horsley, host of The Liminalist podcast, interviews Peter Levenda about 'The Individuation Chamber' (The Liminalist #11.5), published on 22 April 2015 -- their discussion includes 'Americanism and homogeneity, 'Star Trek' and colonialism, psychology disguised as politics, weaponizing Islam, Eisenhower and Dulles, the sorcerer's apprentice'"": #4a at https://www.reddit.com/r/worldpolitics/comments/5bpc5x/an_update_for_my_readers_by_peter_levenda/ddlcuvl          Weaponizing religion (religion as a weapon), nuclear power/atomic power, atomic/nuclear bomb explosion: Start at 40:20 (40 minutes and 20 seconds)      Source + Much More: #7c at https://www.reddit.com/r/worldpolitics/comments/5bpc5x/an_update_for_my_readers_by_peter_levenda/dfmc7kj      Via: https://www.reddit.com/r/worldpolitics/comments/5bpc5x/an_update_for_my_readers_by_peter_levenda/d9q9006      Via: #26 at https://www.reddit.com/r/Missing411/comments/41oph0/supernatural_abductions_in_japanese_folklore_by/cz3we2z  4. Visit      (a) https://www.reddit.com/r/worldpolitics/comments/6iho4e/a_house_armed_services_panel_intends_to_create_a/dj6bhas      (b) https://www.reddit.com/r/worldpolitics/comments/6hfhh0/take_a_globe_spin_it_and_point_with_a_finger_to/dixva87      (c) https://www.reddit.com/r/worldpolitics/comments/6feg5x/putin_interview_did_russia_interfere_in_the/dihhtkq" It's ok if you haven't fleshed out the ideas yet. It's partially why I'm asking questions.  Something you said seemed incorrect and it's better to verify than assume.  I'll check out Friedman's video when I have time, though I've read up on him a bit and find some of his theories hold up and some don't. Can't be specific ATM though. I have had similar thoughts regarding alternative diversifiers for the reasons you mention, but for the most part they don't exist.  Gold is often mentioned, but outside of 1972-1974 when the US went off the gold standard, it hasn't been very effective in the diversification role.  Cash can help a little, but it also fails to effectively protect you in a bear market, as measured by portfolio drawdowns as well as std dev, relative to gov't bonds. There are alternative assets, reverse ETFs, etc which can fulfill a specific short term defensive role in your portfolio, but which can be very dangerous and are especially poor as a long term solution; while some people claim to use them for effective results, I haven't seen anything verifiable. I don't recommend them. Gov't bonds really do have a negative correlation to equities during periods in which equities underperform (timing is often slightly delayed), and that makes them more valuable than any other asset class as a diversifier.  If you are concerned about rate increases, avoid LT gov't bond funds.  Intermediate will work, but will take a few hits... short term bonds will be the safest.  Personally I'm in Intermediates (30%), and willing to take the modest hit, in exchange for the overall portfolio protection they provide against an equity downturn.  If the hit concerns you, Tips may provide some long term help, assuming inflation rises along with rates to some degree. I personally think Tips give up too much return when equity performance is strong, but it's a modest concern - Tips may suit you better than any other option.  In general, I'm less concerned with a single asset class than with the long term performance of my total portfolio. It's called correlation. I found this: http://www.forexrazor.com/en-us/school/tabid/426/ID/437424/currency-pair-correlations it looks a good place to start Similar types of political economies will correlate together, opposite types won't. Also there are geographic correlations (climate, language etc) Someone already mentioned that this is a risk-reversal, but as an aside, in the vol market (delta-hedged options) this is a fundamental skew trade. (buying calls, selling puts or vice versa). Initially vega neutral, the greek that this trade largely isolates is vanna (dvega/dspot or ddelta/dvol). VXX VZX XVIZ and there are plenty others correlated to market volatility if you want the wildest hedge, use VXX, it is also the most liquid Yes that is the case for the public company approach, but I was referring to the transaction approach:   Firm A and Firm B both have $100 in EBITDA. Firm A has $50 in cash, Firm B has $100 in cash.  Firm A sells for $500, Firm B sells for $600.  If we didn't subtract cash before calculating the multiple: Firm A: 5x Firm B: 6x  If we DO subtract cash before calculating the multiple: Firm A: 4.5x Firm B: 5x  So yea, subtracting cash does skew the multiple.