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Gerard O’Reilly

lines on the record: 80
first: 2022-05-20
most recent: 2022-05-20
sittings or episodes: 1
sources: podcast

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“And it's really helped shape how I view what good investment solutions are for clients and what really the power of markets are and can be.”
2022-05-20 · Masters in Business · Gerard O’Reilly on Academic Research and Stocks · IDENTIFIED FROM THE TRANSCRIPT · source
“When I was first getting started, I had this view of the world because I had never taken a course in finance before dimensional, which, and I didn't understand markets that well. I had the view of the world that all you had to come was a better mathematical model than anybody else out there. And then that would be able to predict where prices were going to go. And of course, I was quickly disabused of that notion after having conversations with Ken and Gene and Bob and Myron and just need a better model. You just need a better model. So I wish I had known that Den, but now I certainly know it.”
2022-05-20 · Masters in Business · Gerard O’Reilly on Academic Research and Stocks · IDENTIFIED FROM THE TRANSCRIPT · source
“Go out and get it done. Then, when it comes to finance in particular, remember what you're doing. You're taking people's life savings and you're trying to help them achieve objectives and goals and they're taking risks to achieve those objectives and goals that they couldn't achieve without taking those risks. And that's a very, very meaningful responsibility. So don't take it lightly and you're moving into a field that you can really help people have a better life. But you can also harm people if you do things in the wrong way. So I think that that's something that you've got to keep in mind when it comes to finances, not your money. It's somebody else's money. And then you can really help people be better off.”
2022-05-20 · Masters in Business · Gerard O’Reilly on Academic Research and Stocks · IDENTIFIED FROM THE TRANSCRIPT · source
“So, two big areas. One, and this is something that is kind of, I call it a dimensional motto, and it's do the right thing, do it the right way, do it right now. And so when you're pursuing a career in any field, you want to feel good about what you're doing. You want to feel that you're helping people. You want to do well while you're helping people, but that's the right thing. And then do it the right way is how do you come with a path to make a decision that uses as much of the information that's available to you. There's going to be a lot of noise in the outcome, but you want to be proud of the decision that you made given the information that you had at the time. I think that's doing things in the right way. And then do it right now. Never sit on your hands. Be proactive. Get after it. Close projects. If you can't close it, move on. Ask for help. And don't sit on your hands.”
2022-05-20 · Masters in Business · Gerard O’Reilly on Academic Research and Stocks · IDENTIFIED FROM THE TRANSCRIPT · source
“You know, I am not reading any book right now. I've been consumed with work over the past few years, and my reading for pleasure has taken a back seat, unfortunately. But some of my favorite books over time, I would say, one, freedom to choose. I don't know if you've read that book by Milton Friedman, I think is a great book and timeless. I mean, written many decades ago, but very, very timeless. The road to serfdom, I think, is one of the all-time classics as well. It's an all-time classic. So you kind of get my idea from, I like books about markets. About how to organize people and how do you get to a state of affairs where you're making the most efficient use of the resources, where people have freedom to pursue what interests them, I find that an interesting area of reading.”
2022-05-20 · Masters in Business · Gerard O’Reilly on Academic Research and Stocks · IDENTIFIED FROM THE TRANSCRIPT · source
“For as long as they're on this planet, because what else is there to do but try to improve your skills and how you interact with the world?”
2022-05-20 · Masters in Business · Gerard O’Reilly on Academic Research and Stocks · IDENTIFIED FROM THE TRANSCRIPT · source
“I would say that in terms of folks that have shaped my career, some of the names that you mentioned, whether it's Fama, French, Merton, have all been very helpful to me over time. David, of course, has been very, very helpful to me over time. Eduardo, he used to work at Dimensional, has been very helpful to me over time. And then I'd be remiss if I didn't say my parents, because they're up until the time that you leave the home and your ultimate mentors in terms of shaping how you approach problems, how you view the world, what you prioritize. My parents have always emphasized education and the importance of keeping your mind active and trying to better yourself. How do you become better than you were the day before? And that's a spirit that I think is important for anybody to keep kind of pulling towards”
2022-05-20 · Masters in Business · Gerard O’Reilly on Academic Research and Stocks · IDENTIFIED FROM THE TRANSCRIPT · source
“And they have little three-year-olds, four-year-olds, five-year-olds, and their parents give them a task to do. And then they have to go off around town, into the shop, and they're followed by a camera coup by themselves. And they accomplish this task. It's hilarious. It's really, really fun to watch. Old enough. Old enough. We'll have to check that out. That's a fun one.”
2022-05-20 · Masters in Business · Gerard O’Reilly on Academic Research and Stocks · IDENTIFIED FROM THE TRANSCRIPT · source
“Interesting, just how do you ever get there? Because war is an irrational act, so what are the things that have to happen in order to get there? Because it's much more rational to cooperate and to trade than it is to go to war. Everybody will be better off in the former and worse off in the latter. So how do you actually get to that state of the world is interesting? I have a six year old daughter, and so we watch shows together, and that also keeps me entertained. She loves if I were an animal. I don't know if you've seen that show on Netflix, but that's a goodie. And then another one that came out recently on Netflix is old enough. I don't know if you've seen this. It's a Japanese show.”
2022-05-20 · Masters in Business · Gerard O’Reilly on Academic Research and Stocks · IDENTIFIED FROM THE TRANSCRIPT · source
“Yeah, a couple of different shows have been keeping me entertained. So, I was in a board meeting, one of the advisor board meetings, and one of the board members, Mac McCrown, said that he had been watching a documentary series called The Prize. And the prize is from a while ago. It's about the kind of the history of oil and how it started and where it evolved to and all the various different issues that have arisen as a result. So that was super interesting. And I'd recommend that to anybody who's kind of interested in those types of historical shows. Other things that I find interesting over the past few years, I've watched a lot of documentaries about World War II, World War I, Vietnam War. Ken Burns has some great stuff, even on the US Civil War, that have been very interesting. The fog of war, that was another interesting show. I find those particular...”
2022-05-20 · Masters in Business · Gerard O’Reilly on Academic Research and Stocks · IDENTIFIED FROM THE TRANSCRIPT · source
“Which seems to be a little confusing. A little confusing. And so new data emerges all the time and then you create models to try understand those data. But, you know, it's not well understood yet. I will say it's well understood, not completely understood. And there's a lot left that's not known yet for people to discover.”
2022-05-20 · Masters in Business · Gerard O’Reilly on Academic Research and Stocks · IDENTIFIED FROM THE TRANSCRIPT · source
“With the expansion in the universe Know it may be a shortcut, but I'd go back to what your earlier statement was, which is around how our models evolve over time, our data evolves over time. Like you saw from a couple of weeks ago, there was a new discovery from the Hubble telescope of the oldest star yet observed.”
2022-05-20 · Masters in Business · Gerard O’Reilly on Academic Research and Stocks · IDENTIFIED FROM THE TRANSCRIPT · source
“Multiple states of the world and is in those multiple states all the time with some set of probabilities. So that's also a very fascinating field of study. And I enjoy those quite a lot when I was working on them back in Trinity College.”
2022-05-20 · Masters in Business · Gerard O’Reilly on Academic Research and Stocks · IDENTIFIED FROM THE TRANSCRIPT · source
“Yeah, it is really a very, very interesting space. And, you know, when I was a kid, I like to read Stephen Hawkings and those types of books. So I was very interested in relativity and so kind of that side of what Einstein worked on. And I found that very interesting. We had a lot of courses on relativity when we were in university, in theoretical physics. The other side is quantum mechanics. And quantum mechanics is very, very interesting because you never know anything with certainty. So it kind of has parallels to the real world. You can't know something's position and its speed at the same time. You can only know one perfectly or you can know both with a lot of uncertainty. But quantum mechanics is also incredibly interesting because everything has”
2022-05-20 · Masters in Business · Gerard O’Reilly on Academic Research and Stocks · IDENTIFIED FROM THE TRANSCRIPT · source
“Both here in the US of corporates and of other bonds around the world issued in different currencies. And so we can look at lots of different high interest rate, low interest rate environments, transitions between those when the interest rates had gone up or gone down. And so we can understand, are there certain strategies that work better or worse in each of those environments? And then we can design strategies that work well for both environments. So that long-term view is something that we always keep in mind, which means that something that happens over a decade or 15 years does give us new information, but doesn't necessarily change dramatically our investment priors.”
2022-05-20 · Masters in Business · Gerard O’Reilly on Academic Research and Stocks · IDENTIFIED FROM THE TRANSCRIPT · source
“So, I would say it's a little bit of yes, a little bit of no. In the yes category is that certainly after the financial crisis, the global financial crisis, there were a lot of client questions about the role of fixed income in a portfolio. Because if you're used to headier times when interest rates were higher, you might have a different perspective on how to use that strategy than when interest rates are low. And so that has informed, okay, what are the things that our clients are caring about? And what is it that we need to deliver to clients given that those are the concerns and these are the problems that they're trying to solve in a low interest rate environment? So that's a little bit of yes because it's been on clients' minds. The little bit of no is that we've had decades upon decades, 50, 60 years and longer of data on the returns of bonds.”
2022-05-20 · Masters in Business · Gerard O’Reilly on Academic Research and Stocks · IDENTIFIED FROM THE TRANSCRIPT · source
“But a globally diversified portfolio of stocks and bonds returned about 4%. So in a zero Fed funds rate, you got about a 4% return. So again, it goes back to you don't have to be able to predict the unexpected. You just have to be able to plan for it and then stick with that plan regardless of what the unexpected brings to pass.”
2022-05-20 · Masters in Business · Gerard O’Reilly on Academic Research and Stocks · IDENTIFIED FROM THE TRANSCRIPT · source
“Other rates out there, other interest rates don't move in lockstep with what the Fed is doing. So if you think about that and you extrapolate, you have interest rates on the short end, the intermediate end, the long end, you have interest rates as they apply to corporate bonds from AAAs down to double B's. You have interest rates from bonds issued in euros, in British pounds, in Aussie dollars and so on and so forth. And none of them move in lockstep with this Fed. So you can diversify. That's how you plan. The Fed may do what it's going to do, but it's one interest rate among money. And all of those other interest rates are going to drive the returns of your broadly diversified portfolio. Because if you look from OA8 on the subsequent 10 years, the Fed funds rate was basically at zero for a decade.”
2022-05-20 · Masters in Business · Gerard O’Reilly on Academic Research and Stocks · IDENTIFIED FROM THE TRANSCRIPT · source
“Instruments like inflation swaps and so on that can hedge out your inflation exposure. They're the two ways to deal with inflation in our view. You can plan for it, you can't predict when you're getting the spike, but you can plan for it. When it comes to interest rates and increasing interest rates, again, you can't predict when they're going to shoot up. That's not something that you can predict, but you can plan for it. How do you plan for it? Well, we mentioned earlier on that there's an obsession over the Fed funds rate. But if you look over the past 30 years, 30 to 40 years, the Fed has increased the Fed funds rate one month out of six, has decreased the Fed funds rate one month out of six, and has left it flat in the other four months out of six. That's been about the pattern over the past 40 years. And when you look at the months in which it's increased the Fed funds rate, about half the time the 30-year rate has gone up and about half the time, the 30-year rate has gone down. So what does that tell you? It tells you that...”
2022-05-20 · Masters in Business · Gerard O’Reilly on Academic Research and Stocks · IDENTIFIED FROM THE TRANSCRIPT · source
“Yeah, inflation and interest rates. Inflation has been high. Everybody knows that over the past while. And the way that we view inflation is there's two things that you can do. The markets you can look at get understanding of what the market expects, but the unexpected often happens. Nobody can predict the unexpected. So therefore, but you can plan for the unexpected. And you can plan to outpace it or to hedge it. And so if you want to outpace things like what you mentioned, corporate bonds, global leadersified bond strategies, equities and so on, over time have had positive real returns. So returns in excess inflation in high inflationary environments and low inflationary environments. If you look back at 30 past 30, 40 years, you'll see that. If you want to hedge it, you can use Treasury Inflation Protective Bonds, and we think that they are a good solution. You can also then, if you don't want to give up so much expected return, buy corporates or bonds like that, and then hedge it with different types.”
2022-05-20 · Masters in Business · Gerard O’Reilly on Academic Research and Stocks · IDENTIFIED FROM THE TRANSCRIPT · source
“Decay slowly unless there's another big shock that comes along to spike it back up. So it tends to decay over the over a course of three to six months, goes back down to normal levels. And you can actually see that from market prices. There's different market prices that tell you about the implied volatility of markets over the next 30 days, over the next 30 days following that, the 30 days following that and so on and so forth. And what you see from market prices is that when you get a big spike from market prices is expected to decline over the next subsequent months. And we saw that.”
2022-05-20 · Masters in Business · Gerard O’Reilly on Academic Research and Stocks · IDENTIFIED FROM THE TRANSCRIPT · source
“So, what we've learned over time about volatility is that when there's a market crisis, and this goes without saying, volatility increases. Why? Because uncertainty increases. There's a lot more uncertainty about what the range of outcomes may be. And that uncertainty leads to a few different things. Increases in the volume of stocks and bonds that are traded, increases in bid-offer spread, so the cost to trade those stocks and bonds, increases in volatility. All of those things come in a crisis. And we had a crisis in March of 2020 when Russia invaded Ukraine. We had another crisis. How would that translate into global markets? And volatility tends to spike. What we've also learned over time is that spikes in volatility are unpredictable. So it's a shock, it's unexpected for a reason because it's unpredictable. And then once it spikes, it tends to”
2022-05-20 · Masters in Business · Gerard O’Reilly on Academic Research and Stocks · IDENTIFIED FROM THE TRANSCRIPT · source
“Firms innovate and try to take that top spot. So there it's just success of those companies and that's driven the investor demand for those companies because they've been able to satisfy so much client demand. Those are well-run companies and investors see high cash flows from those companies and they're willing to bid up the prices.”
2022-05-20 · Masters in Business · Gerard O’Reilly on Academic Research and Stocks · IDENTIFIED FROM THE TRANSCRIPT · source
“And there I'd point to you to the last decade, which was the previous decade where small cap stocks, non-US stocks, emerging market stocks greatly outpaced US large cap stocks. And then in the decade that you're referring to, it flipped completely. And U.S. large cap stocks outpaced everybody else, in particular U.S. large cap growth stocks. Again, I'd put that down. There's an unexpected component to that. And I'd put it down to the success of some of those US firms that are now the largest firms in the US marketplace. That doesn't mean they'll continue to be the largest firms in the US marketplace because what we've seen over time is that the largest firms tend to get there by outperforming everybody else. In the global marketplace now, the US has many of those largest firms. And then in the one to five years after they become the largest firms in the world, they tend to underperform everybody else's other firms.”
2022-05-20 · Masters in Business · Gerard O’Reilly on Academic Research and Stocks · IDENTIFIED FROM THE TRANSCRIPT · source
“Time. That is unexpected. That's an unexpectedly good outcome, not for society, but for the firms that were well positioned to meet the needs of society when that unexpected event began to unfold.”
2022-05-20 · Masters in Business · Gerard O’Reilly on Academic Research and Stocks · IDENTIFIED FROM THE TRANSCRIPT · source
“It's obvious after the fact, but in the middle of it, you never know exactly what's going to happen because there's always new technologies. People often talk about the new normal, and there is no new normal because technologies have been developed persistently decade by decade for the past hundred years. And those technologies give rise to uncertainty about who will adapt and use them in the best manner and who will be the winners and who will be the users once that new technology comes into place. So there's always a massive amount of uncertainty. It existed a decade ago and it exists today. And what we look to markets to do is process that information to say, given that uncertainty, who am I going to demand a higher return to hold or a lower return to hold? So I think that's the state of the world. But even things who was going to predict that COVID would come along and be such a boon to the Amazons and the Netflix of the world because everybody who was locked in their house for some period of time.”
2022-05-20 · Masters in Business · Gerard O’Reilly on Academic Research and Stocks · IDENTIFIED FROM THE TRANSCRIPT · source
“Those value stocks, in particular in the US, when you look at the price to earnings or price to book ratios of value stocks for versus growth, those ratios and those differences had grown dramatically large. So growth had become higher, higher, higher, higher in terms of their valuations, whereas value had stayed kind of right around where it was because value had come in kind of like its long-term average, but growth had come in well ahead of its long-term average in terms of returns. And so value was still in the same position to deliver those good returns going forward, whereas the expected returns on growth stocks had probably dropped given those higher valuations.”
2022-05-20 · Masters in Business · Gerard O’Reilly on Academic Research and Stocks · IDENTIFIED FROM THE TRANSCRIPT · source
“Yeah, it's a very interesting question. I'm going to flip it around on you, Barry, which is why did we have such a long run of growth outperforming value over the 2010s? Because that's the unexpected outcome. Value outperforming growth is not the unexpected outcome. Because when you think about value stocks, they're stocks that have lower prices and higher expected cash flows. So by definition, investors have applied a higher discount rate to them. And that's every day. And so you expect them to outperform growth stocks. When growth outperforms, that's the unexpected outcome. And that happens plenty because returns over the short pull are”
2022-05-20 · Masters in Business · Gerard O’Reilly on Academic Research and Stocks · IDENTIFIED FROM THE TRANSCRIPT · source
“And that was in part because if you go back to 2014 when the annexation of the Crimea by Russia at that point, we have a set of criteria that we go through, rule of law, how our foreigners treated versus locals, the local infrastructure. And we said, you know what? That criteria for that country right now is not quite being perfectly well met. So we reduced Russia to a half weight in 2014. So we already had that flexibility built in. But that's very helpful when you go through time periods like this because you have a systematic approach that's largely rules-based, but you can't come with a set of rules that will contemplate every state of the world. So you need to have people who have pragmatic and practical experience to say, well, what can we actually implement in the real world? And then how does that citizen overlay on top of what we do? So I think that this year that has been helpful.”
2022-05-20 · Masters in Business · Gerard O’Reilly on Academic Research and Stocks · IDENTIFIED FROM THE TRANSCRIPT · source
“Innovation and the right price point. So that's one basic principle. The other two are that prices are predictions of the future. Market prices are forward-looking. How do you use those prices to manage risk and increase expected returns? And the third is that optionality has value. We should capture it on behalf of our clients. So when you go through a time period like what we've just been through, where you have Russia invading Ukraine, all the sanctions that then subsequently came on Russian companies, Russian stocks, Russian individuals, that flexibility or optionality is critical because what we were able to do was in January when there was a lot of talk of sanctions versus various different companies and individuals that we were able to freeze purchases on all Russian securities, which was an important part of our process. We said, okay, let's take a wait and see approach.”
2022-05-20 · Masters in Business · Gerard O’Reilly on Academic Research and Stocks · IDENTIFIED FROM THE TRANSCRIPT · source
“You're right, it has been a rocky start of the year in absolute terms. And when you look at the first quarter of 2022, a lot of the major indices, whether that's US or non-US developed, are emerging, are in the negative territory. Your right value has continued on. It's good run and value has been having almost like a two-year good relative performance, which is more what we expect from the world. And that continued on in the first quarter for sure, where value stocks help perform growth stocks by as much as 10 percentage points and lots of different regions around the world. So that's been good for the investors in dimensional strategies because a lot of our strategies on the equity side overweight value stocks and stocks with high profitability and so on. In terms of navigating the volatility, when you go back to our investment principles, there's probably three that I would highlight. One, systematic approach is a good approach for investors with the right support, the right”
2022-05-20 · Masters in Business · Gerard O’Reilly on Academic Research and Stocks · IDENTIFIED FROM THE TRANSCRIPT · source
“It's a combination of duration, it's a combination of credit, and then it's also a combination of currency of issuance. When you think about fixed income, a lot of people focus on the Fed and what's the Fed's going to do. Sure. That's one rate among hundreds of rates out there because there's different currency of issuance, different durations, different credit qualities. And what we do is we take in 500, 600 different interest rates from around the world and we use that information every day to say how do we increase expected returns, the return of this portfolio, but manage risk very, very robustly. So again, it has an index feel, but it goes beyond indexing with an active implementation to add value and manage risk.”
2022-05-20 · Masters in Business · Gerard O’Reilly on Academic Research and Stocks · IDENTIFIED FROM THE TRANSCRIPT · source
“That's a fair statement on the equity side for sure. On the fixed income side, we do things that lead to slightly higher turnover because of the information that you can take out of yield curves at any point in time. But on the equity side, a core strategy has 10% turnover, a value strategy, 20% turnover in a given year. And how to think about that is like in a value strategy. When you buy a stock, you expect to hold it for about five years at 20% turnover. That's how you can kind of translate that into holding period.”
2022-05-20 · Masters in Business · Gerard O’Reilly on Academic Research and Stocks · IDENTIFIED FROM THE TRANSCRIPT · source
“By November of 2020, so almost a year after the rule came out, we had launched. Those were the two big drivers. On the tax efficiency side, that wasn't as big a driver for us, largely because, and you're familiar with this, our mutual funds tend to be highly tax efficient. And we had taxed-managed mutual funds that had similar tax efficiency ratios to ETFs. So we had very, very tax efficient approach. ETFs take it up a little bit, our ETFs do, but it was more what our clients were asking for and the rules changed such that we could deliver a investment proposition that was on par with our mutual fund investment proposition.”
2022-05-20 · Masters in Business · Gerard O’Reilly on Academic Research and Stocks · IDENTIFIED FROM THE TRANSCRIPT · source
“And what that rule effectively did was it made ETFs much more straightforward to bring to the market much more straightforward for the end investor to evaluate, but then also clarified some things around the inner workings of ETFs that were important to us because we're not an index manager. We have a lot of the benefits of an index-based approach that include broad diversification, load turnover, low costs, but we have an active implementation. And so those rules got passed in 2019, the fourth quarter of 2019 is when the SEC adopted those rules, Rule 6C11 for anybody who's nerdy enough to want to look into them. And that was a bit of a game changer for us. We could do now what we had done in our mutual funds for decades in an ETF wrapper. So there was no give up on the investment proposition. As soon as that rule was passed, we went into full launch mode. By June of 2020, we had announced that we were going to launch...”
2022-05-20 · Masters in Business · Gerard O’Reilly on Academic Research and Stocks · IDENTIFIED FROM THE TRANSCRIPT · source
“There was two big drivers of that decision. The first was input from clients. And as I mentioned earlier on, we work with financial professionals, so we don't work with the end retail consumer. We work with financial advisors like firms like yourself who can get that level of understanding and knowledge and experience so they understand what we're trying to accomplish. A lot of those firms were saying we're using ETFs more and more frequently on behalf of our clients and we'd like to be able to use dimensional ETFs. Could you launch ETFs please?”
2022-05-20 · Masters in Business · Gerard O’Reilly on Academic Research and Stocks · IDENTIFIED FROM THE TRANSCRIPT · source
“Life in November of 2020 and we're around 48 billion in ETF assets over the course of that time period. So I think that's been a good outcome. So same investment philosophy as what we've had in Comingle Mutual Funds but now in ETF separately managed accounts. How do we use new technology to take that minimum down to a half a million dollars from where we used to be $20 million minimum for our separately managed accounts? And we've built that technology a true fintech solution to that problem so that we can serve those types of clients as well. So how we'll get there is by identifying the needs that our clients have and keeping in mind the three C's, which is there's a lot of complexity in the world that requires customization to come with good solutions, but people want it conveniently. So can we identify the complexity? Can we provide the tools so that people can customize the right solution?”
2022-05-20 · Masters in Business · Gerard O’Reilly on Academic Research and Stocks · IDENTIFIED FROM THE TRANSCRIPT · source
“There is exactly what I said serving clients well. It's clients first. We think that if we deliver a great client experience, the great support for that systematic approach so clients can understand, know what to expect, be able to have conversations. We work with financial professionals, so they have to have conversations with their constituencies and who they're accountable to. We think that that will also help us grow. And then in terms of the tactics to get there, Dave and I have really discussed this over the past number of years. And we think that our investment philosophy is very, very powerful. And I can get into that in a moment. However, the means for delivering that investment philosophy have evolved over time. And our view is you get to learn our investment philosophy one time, but then choose your own adventure on what vehicle you like to consume that under. So you know that we've launched ETFs recently and we've had what I would view as a lot of success on the ETF space. Our first ETF went”
2022-05-20 · Masters in Business · Gerard O’Reilly on Academic Research and Stocks · IDENTIFIED FROM THE TRANSCRIPT · source
“Yeah, we definitely feel that dimensional has a lot of runway for growth. And there's a few different reasons behind that. One, we view that many different investors and managers have come around to our point of view that systematic strategies are very, very beneficial for the end investor. And by systematic, I mean more rules-based approaches, approaches where you can communicate up front, here's what you can expect from this strategy, and then validate after the fact that you got and delivered what you said you were going to deliver. And I think that's incredibly important for investors to build trust and confidence in the strategies over time. Dementia has been doing that for 40 years. So I think that's one reason that best ideas win. And we have some of the best ideas, in my view, and therefore that will serve clients well. And if you're serving your clients well, you'll grow. Second kind of component.”
2022-05-20 · Masters in Business · Gerard O’Reilly on Academic Research and Stocks · IDENTIFIED FROM THE TRANSCRIPT · source
“Of the things that come in my view with wisdom and wisdom comes with experience, I believe, is how to communicate, how to message, and how to help people understand your point of view without alienating those folks. And I think that's something that has been very helpful for me in working with my colleagues at Dimensional Butler, Dave Butler is a master of that, of course. And so, okay, you have a great idea. But if you can't communicate that great idea and you can't help people understand why it's a great idea, it's going to die on the vine. You really need to have the great idea and also have an understanding of how people receive the information. And I think that's something that I've always tried to pay close attention to how my colleagues do that and the colleagues that do it effectively. How do they do it effectively? Because ultimately,”
2022-05-20 · Masters in Business · Gerard O’Reilly on Academic Research and Stocks · IDENTIFIED FROM THE TRANSCRIPT · source
“Embrace the best idea and the right idea because ultimately long term that's going to be better for the clients and if you make it better for the clients you're going to have a better business so you know when it comes to business clients first makes business very straightforward on how to make decisions and what decisions to make and I think that atmosphere I've always enjoyed it dimensional and so therefore age has never been never been an important ingredient”
2022-05-20 · Masters in Business · Gerard O’Reilly on Academic Research and Stocks · IDENTIFIED FROM THE TRANSCRIPT · source
“So I'd never really thought about it, to be perfectly honest. I've always been on the younger side, whether it was in high school relative to the rest of the folks in my class. I went to college when I was 16. And so it was a little younger than the other folks in my class. And then when I started working at dimensional after doing a PhD was younger than some of the other folks in the research team. So it's always been kind of the state of play. So I don't think about it too much. I would say at dimensional we have a very academic view of how to interact with each other. So interact with each other with respect, but challenge and argue the facts and the issues and the best ideas win. And so I think that when it comes to how to interact with colleagues, whether they're younger or they're older, it's exactly under that formula. You have to operate with respect, listen to the ideas, and then the best idea wins. Our view is don't defend the idea just because it's your idea.”
2022-05-20 · Masters in Business · Gerard O’Reilly on Academic Research and Stocks · IDENTIFIED FROM THE TRANSCRIPT · source
“Those fives, you see very, very strong and reliable value premiums, and you can't actually tell the difference between any of those five about the magnitude, statistically speaking, between the realization of those premiums. That's robustness. You've seen it in sample and you've seen it in many out-of-sample tests. That gives you high confidence that what you're observing in the data happen by more than just chance. It's something real and you should expect to see it going forward. But that's the type of rigorous analysis that we're able to apply to new observations because now we have so many different data sets that we can test the observation on. We can shape up the experiment, we can find out where the bodies are buried, how robust it is, and that gives us confidence in the patterns that we're observing in the data, whether they're real or it's just noise.”
2022-05-20 · Masters in Business · Gerard O’Reilly on Academic Research and Stocks · IDENTIFIED FROM THE TRANSCRIPT · source
“Prescription or a kind of like almost a list of ingredients. Here's how you create a factor model, and that's been used by most academics since. So the formula that they used has been used by most academics since. So then later on in the 90s with Jim Davis, who used to work at Dimensional, he gathered a whole bunch of pre-1960s data. So he was able to extend the original FEMA French analysis to a completely out of sample test. And that went from the 20s to the 60s. Then non-US developed market data were collected, and the same tests that FEMA and French had run on their original sample was run on non-US development markets. And then it was run on emerging market data because that was collected. And now we're 30 years past the FAMA-French original experiment. So now we have another out of sample test. And so you have five out of sample tests and in four of”
2022-05-20 · Masters in Business · Gerard O’Reilly on Academic Research and Stocks · IDENTIFIED FROM THE TRANSCRIPT · source
“And the way that we think about testing things well is number one, do you expect to see this in the data? Before you look, why are you looking for this thing? And so that kind of reduces some of the issues with biases and back tests. You expect it before you go see. And then you see the data tells you how strong it has been or hasn't been. Then you want to do a lot of robustness checks because robustness is the name of the game. So you've tested it in one data sample. Can you test it in multiple data samples? Can you test it out of sample? So I'll give you an example. I think this experiment is kind of unique when it comes to academia. When you look at famine and French in their 92 paper, they used US stock data from the 60s to the 90s. And they tested value premiums and leverage and all sorts of things in that paper over that data sample and produced the three-factor model. Then they came up with a”
2022-05-20 · Masters in Business · Gerard O’Reilly on Academic Research and Stocks · IDENTIFIED FROM THE TRANSCRIPT · source
“It really is amazing. And so over time, you know, you had Crisp and then you had other supplements where company financials were added to the data set and all joined and linked up together. So effectively you could test things well.”
2022-05-20 · Masters in Business · Gerard O’Reilly on Academic Research and Stocks · IDENTIFIED FROM THE TRANSCRIPT · source
“Yeah, Chris was started back in the 60s and it was basically an effort by University of Chicago and folks there to gather all the stock price data and dividend data and corporate action data to say, can we compute a return on the US stock market? Because pre-1960s, you couldn't get that with a great deal of precision. It's amazing.”
2022-05-20 · Masters in Business · Gerard O’Reilly on Academic Research and Stocks · IDENTIFIED FROM THE TRANSCRIPT · source
“Then at dimensional, we've developed a lot of in-house proprietary data sets that go back many, many decades that include data with a level of cleanliness, I would say, and precision that's probably kind of second to none with respect to all the data sets available out there. And of course, we're here at Bloomberg Studios who love data and we love data too.”
2022-05-20 · Masters in Business · Gerard O’Reilly on Academic Research and Stocks · IDENTIFIED FROM THE TRANSCRIPT · source
“Yeah, you hit on it perfectly, Barry. You're never going to see a bad back test, in particular from an asset manager. Well, because that's where they all go to die. It's all survivorship bias. It's all survivorship bias. So it is a real challenge. And that's true even of the academic work because in academia, how do you get tenure? You publish papers, the types of papers that get published are those with startling empirical observations. And so the 100 experiments that were run that didn't lead to a startling empirical observation are never published and the one that did is published. So you have that bias when it comes to academic and practitioner work. The way that we think about it is kind of nuanced. First off, we start with the broad review of the academic literature. What's the latest and greatest out there in academia?”
2022-05-20 · Masters in Business · Gerard O’Reilly on Academic Research and Stocks · IDENTIFIED FROM THE TRANSCRIPT · source
“Over the past number of quarters, and that has predictive power on how well run that firm is expected to be over the next few quarters.”
2022-05-20 · Masters in Business · Gerard O’Reilly on Academic Research and Stocks · IDENTIFIED FROM THE TRANSCRIPT · source