Tag: Asset Class Analysis

  • Is Rebalancing Really a Good Idea?

    Investing involves tradeoffs. Perhaps the primary tradeoff is between expected return and expected risk. Investing is difficult, at least in part, because we can never be sure, when we look into the future, if our expectations about future return or future risk are correct. Given that investing is a balancing…

  • Are Bonds One Asset Class, or Multiple?

    Theory and history suggest that for bonds, changes in interest rates are the dominant risk factor. Most of the rest of the risk is explained by credit risk. History also shows that in times of greatest stress, credit risk and liquidity risk can dominate interest rate risk. These characteristics can…

  • What makes an Asset Class? Bonds as a Case Study

    In a previous post, we observed that while seemingly everyone talks about “asset classes,” there is little detail on what an asset class actually is. We offered the following definition: An asset class is a set of assets that have similar expected returns, risks, and that share a high degree…