YouSaid · the spoken record

Scott Cliff Asness

lines on the record: 171
first: 2015-02-21
most recent: 2015-02-21
sittings or episodes: 1
sources: podcast

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“They've certainly become that. We call that the death combination. It's a bit melodramatic. And it can happen if anyone does it. No one has magic. Leveraging an illiquid asset with leverage you have to pay back tomorrow. That's extremely dangerous.”
2015-02-21 · Masters in Business · Masters in Business: AQR Scott Cliff Asness (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“And here you guys can all think I'm wimpy for all the caveats, but you got to be very careful. I would never want to be quoted as just saying leverage is a good thing because you go take a concentrated bet that's already scary and lever it. You've made it super scary. You go lever something that's not very liquid with leverage that has a shorter time horizon, shorter term.”
2015-02-21 · Masters in Business · Masters in Business: AQR Scott Cliff Asness (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“What the stock is doing. Here's an accurate but very nice, but still, I think, not overnice, just accurately nice way to describe it. He does what he says he does. And that's what our guys verified. Now, that might seem like a small thing, but do you know how many times you go look and find someone doesn't do? They say they do, he systematically, and he's not following a quant system, but he systematically with a great nice fit long term, looks like someone looking for. Profitable low risk stocks. And then here's something that I do believe we just know he does. He applies a modest amount of leverage to it. If you buy low risk stocks, and this is something we believe.”
2015-02-21 · Masters in Business · Masters in Business: AQR Scott Cliff Asness (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“Have a loading on momentum. You need to rebalance the load on momentum. If he had one, we would have doubted our data. He also loaded, though interestingly, on the major measures for quality, things like profitable companies and low risk companies.”
2015-02-21 · Masters in Business · Masters in Business: AQR Scott Cliff Asness (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“Late 90s. Oh, he's over. He's done. 70s. He suffered greatly in the bear market. He's had his ups and downs. But what they did was they took some of, admittedly, the standard things people like us look at. Same things you and I have been talking about. Value, yes, not surprisingly. He has a tilt towards systematic value. Doesn't mean he's a quant following the strategy. Right. It just means his returns tend to correlate, tend to move when cheap beats expensive, it's a better time for Buffett. At a time like 99 when expensive crushes. Cheap. All I'll sequel, your guests would be not as good a time for Buffett. He had no waiting on momentum. Not surprising. How could a man who's holding period preferred holding period is forever, an actual holding period is very, very strong, very, very long.”
2015-02-21 · Masters in Business · Masters in Business: AQR Scott Cliff Asness (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“They did a really fun thing. And by the way, let me say beforehand in case we don't get to it, we ended up with, we had tremendous, incredible respect for his investing skill beforehand, and we ended up there afterwards. When we say and we do a couple times, and I'm going to guess he wouldn't agree with this. I've not spoken to the man personally about it, we say things like we explain his alpha. That is saying that after 30, 40 years, we've seen that these are factor tilts. He did it 34 years ago, 30, 40 years ago. He stuck with it through incredibly big ups and downs. He has not always made money. In the late 90s,”
2015-02-21 · Masters in Business · Masters in Business: AQR Scott Cliff Asness (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“White paper? We'll take Charming. Okay. This was written by colleagues of mine, David Cabilla, Lasse Peterson and Andrea Frazzini. So I'm just going to take credit for their work or blame because I'm the one here.”
2015-02-21 · Masters in Business · Masters in Business: AQR Scott Cliff Asness (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“And cheaper than the market. Doesn't mean you should pick a random portfolio. Once you think small and cheap work, you might want to be a little more systematic about it than throwing darts. Rob's way, our way, other DFA's ways, other ways. I would say are better than random. But Random will get you a little towards small and cheap.”
2015-02-21 · Masters in Business · Masters in Business: AQR Scott Cliff Asness (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“But it's a great way. It's a fantastic way to show it. It's awesome again, yes. But if you pick a random portfolio, you will be smaller.”
2015-02-21 · Masters in Business · Masters in Business: AQR Scott Cliff Asness (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“I doubt there's beta going on. I doubt there's a tremendous. If you randomly select a portfolio, it probably goes the other way, you're probably a little high beta.”
2015-02-21 · Masters in Business · Masters in Business: AQR Scott Cliff Asness (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“So if you get that random portfolio, it's a fun finding, but it really is saying something, and again, this one I'm not saying, I'm not kind of lacking this great originality in this finding, but we kind of knew it again. So it's not beta.”
2015-02-21 · Masters in Business · Masters in Business: AQR Scott Cliff Asness (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“Will look cheap because those guys who are overpriced or expensive because of rational reasons. I'll try to fight that battle here. But those guys who are very expensive are bigger market caps. So, to make up the total market cap, there have to be more cheap guys.”
2015-02-21 · Masters in Business · Masters in Business: AQR Scott Cliff Asness (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“Diversified enough that you can't randomly pick just tech stocks. If you take a random portfolio, it starts to look a lot like an equal weighted portfolio.”
2015-02-21 · Masters in Business · Masters in Business: AQR Scott Cliff Asness (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“What happened there, and I don't remember the specific measures he used, but if you get anything close to an equal weighted portfolio, to a random or an equal weighted portfolio, that's why he named it after Malkiel's monkeys, because that's the ultimate statement about a random portfolio. If you get any kind of random portfolio. It ends up tilting towards small value. Rob phrases it in terms of”
2015-02-21 · Masters in Business · Masters in Business: AQR Scott Cliff Asness (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“You avoided the exact same stocks and you overweighted all the same junk that a fundamental index or robber knot would be underweighting. You get to the same place. He came up with a great way to explain value investing as being indifferent to price. It is a very specific value tilt.”
2015-02-21 · Masters in Business · Masters in Business: AQR Scott Cliff Asness (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“Yeah, smart baby. Excuse me. I was making fun. Not beta, not new, still awesome And why is it not new? Because we knew about value forever. A long time. You gave the example in the tech bubble of a few stocks driving everything. You know what? If you tilted towards low price to earn low price to book, low price to earnings, low price to sales.”
2015-02-21 · Masters in Business · Masters in Business: AQR Scott Cliff Asness (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“These are all good things, but I don't think it was as new. My title, as you know, for this was, what was it, Fundamental Indexing, not indexing, not new, still awesome.”
2015-02-21 · Masters in Business · Masters in Business: AQR Scott Cliff Asness (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“The value stock's going to have momentum Value. What I think Rob has come up with is a great way to explain value investing in a different way. Explaining it as ignoring prices and waiting by fundamentals, but you get to the exact same place. What I don't think, and Rob knows this, we've argued about, we've debated it at the Q group, a quantitative finance gathering, is I think he's come up with a great way to explain and market value investing. But that is different than saying he's come up with something that we didn't know about before. We did know about value investing. If he's brought more people into the fold, if on net this makes markets better, because I think more people did value investing, some of the efficacy would go away like it does for any strategies, but prices would be a little more accurate.”
2015-02-21 · Masters in Business · Masters in Business: AQR Scott Cliff Asness (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“Yeah, that's learned. That's nurture, not nature. You're right. If a fundamental index, let's make it simple and just use one measure earnings. Is formed weighting things by earnings. I had a friend Bob Jones who was doing this back in the 80s at Goldman Sachs. It turns out that if you do the math and you compare an index weighted by earnings to one. It's exactly not similar, but exactly the same. As starting with the market cap and tilting with a precise simple formula towards low price to earnings stocks and away from high price to earning stocks.”
2015-02-21 · Masters in Business · Masters in Business: AQR Scott Cliff Asness (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“Let me give you the example. First, I respect the heck out of both Rob and Jim. They are a little bit more on that. We talked earlier about the Schiller Pharma spectrum of efficient markets to inefficient. Maybe they're just more courageous than me. I'm in the muddy middle. They're a little bit more towards Schiller in their explanations. I'm always, I think bubbles and insanity, like you talked about, do happen just more rarely than probably those guys do. And I'm more willing to entertain efficient market risk-based. Maybe it's just in my DNA and I'm still scared of my professor.”
2015-02-21 · Masters in Business · Masters in Business: AQR Scott Cliff Asness (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“I believe, and I think the math is more of a proof than a belief. I'll go far on this one, that fundamental indexing versus the market is a rather clear, straightforward tilt towards value. If you build a fundamental...”
2015-02-21 · Masters in Business · Masters in Business: AQR Scott Cliff Asness (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“But the father of something is an early adapter who's the one most responsible for its popularity by far. And that's certainly Rob. My disagreements with Rob, and we are friends and we are co-authors have been intellectual, never about whether they would outperform.”
2015-02-21 · Masters in Business · Masters in Business: AQR Scott Cliff Asness (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“I don't think it's overstating it. I do think, and Rob's an honest guy, he'll tell you this. People were doing some fundamental indices. There are some people at Goldman Sachs. Oh, Shaughnessy as well.”
2015-02-21 · Masters in Business · Masters in Business: AQR Scott Cliff Asness (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“Where do you want to go with that? Let me start with Smart Beta. You and I talked about hedge funds earlier, and I gave you a schizophrenic answer. I'm going to give you another one. I am both a fan of Smart Beta and its most famous version, fundamental indexing. And a skeptic in a very narrow sense.”
2015-02-21 · Masters in Business · Masters in Business: AQR Scott Cliff Asness (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“I am completely with you. And at this point, I have to say my money would be on some version of that being right because I haven't come up with the others, but they are in the inefficient market's irrationality camp”
2015-02-21 · Masters in Business · Masters in Business: AQR Scott Cliff Asness (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“There are a host of stories like that. I like to get there after I've exhausted all possibilities. I don't feel we have. I have not found yet, this is the part, a risk-based story, a rational story. All those stories, when you say they grow faster, why don't the market recognize that, Barry? If an efficient market, the market should recognize exactly what you said, that it has upside and large cap dozens.”
2015-02-21 · Masters in Business · Masters in Business: AQR Scott Cliff Asness (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“I said I like to start to try to figure out a wrist story Inefficient market stories are quite simple to come up with people. People are irrational. That's why they do this show for these things. They don't appreciate the upside. Inefficient market stories, which I'm not quite willing to go there yet, but those are easy to come up with. These are neglected. People just don't pay as much attention. No wall.”
2015-02-21 · Masters in Business · Masters in Business: AQR Scott Cliff Asness (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“No, no, no, no, no. I'll bang that up one after another. That could be the answer. You jumped on the credit a little too fast. Okay.”
2015-02-21 · Masters in Business · Masters in Business: AQR Scott Cliff Asness (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“Now they're a big company and have a lower cost of capital, a lower expected return, and a higher price, they don't seem to do that. There are weird things that go on. Why small works? We have not helped. But we have helped restore it to its kind of...”
2015-02-21 · Masters in Business · Masters in Business: AQR Scott Cliff Asness (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“Really well. Does really well, and about comparable to the value and momentum effect. We've restored it, we think, to kind of equal standing with some of the other major findings in finance. We've also confused everyone, including ourselves, because we don't have a great economic story for this. It is too big of a premium. I don't yet, I'd like to start with gene pharma stories with efficient market stories, and only be willing to go to inefficient markets if I fail. And small winning is one of the ones some people find it very intuitive, but when you ask them why is it intuitive, well, they're less liquid. Well, then how come the higher quality ones win more consistently? They're a little bit more liquid. It's hard to come up with a great economic story why small wins. Value, I think, is quite easy, whether you like risk or inefficiency. Momentum, you could tell pretty simple stories about people underreacting information. If two small companies merge, do they suddenly go way up in price?”
2015-02-21 · Masters in Business · Masters in Business: AQR Scott Cliff Asness (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“And don't cheat, don't only buy quality, but make it just average quality. So small on net doesn't have a tilt towards high quality or junk. So it's just neutral on it. Turns out we've restored the small farm effect. Small crushes large.”
2015-02-21 · Masters in Business · Masters in Business: AQR Scott Cliff Asness (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“There are high quality small cap, but it had far more junk in it. And you said this earlier as a percentage of the index than the large cap. And I think it's fairly intuitive. But it turns out that small was being seriously hurt. If you believe, and not everyone believes this, but we believe it strongly, that high quality has and will win over the past high profitability is my favorite of them, that profitable firms will Go look at small firms. You're shorting that effect. You're betting against it. Small firms are less profitable, far more junky, unprofitable firms. So you're betting against something that you think works. One thing that academics and applied quants are pretty good at doing is saying, what if we remove that? What if we bet on small but we make it so their average quality?”
2015-02-21 · Masters in Business · Masters in Business: AQR Scott Cliff Asness (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“And you can get in your old debate is this risk? Is it inefficient markets? But we think it's very statistically valid. If you go look at other countries, it shows up again and again and again. High quality beats, low quality. Then we decided to take a look at what does this mean for small. And we noticed something that kind of jumped out at us. The small universe was very low quality, what we often call junkie.”
2015-02-21 · Masters in Business · Masters in Business: AQR Scott Cliff Asness (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“It makes as much money now. Sometimes they don't, of course, but if it makes as much money, we love low risk. I'll pay a little bit more if I have less risk for the same money. And finally, if they're able to pay you a bigger dividend while everything else is equal Growing the same profitability, same risk. Why not? More dividends are good. These are all things that we call quality. We have a separate work, and we're not the only ones to look at this, but we, of course, love our version that looks at these things and goes, all of these things seem to have an unexplained outperformance.”
2015-02-21 · Masters in Business · Masters in Business: AQR Scott Cliff Asness (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“Yeah, well, we do it much geekier than he does, of course, and we do it in a diversified way. He does it by picking the right quality, and he also cares about value and other things. But what's a quality stock? It's anything that you, not just theory, but in intuition, anything that makes sense that you pay more for. Why would you pay more for a stock? Well, if it's more profitable, if those profits are growing faster. And you believe, by the way, this will continue. And you can show that a profitable company tends to be profitable next, quarter and whatnot, you should pay more for these. You should pay more for a lower risk company, all else equal.”
2015-02-21 · Masters in Business · Masters in Business: AQR Scott Cliff Asness (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“At small value, certainly as momentum, small momentum, whatever you want to do, most of the rest of empirical finance was better than the small farm effect. It was a week. And people have been losing faith in it. We discovered in relatively recent research by us and others totally separate than this, looks at quality investing. This son Warren Buffett figured out 30, 40 years ago. It took us a little while to get to it. But what's a way?”
2015-02-21 · Masters in Business · Masters in Business: AQR Scott Cliff Asness (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“Small stocks. And should they beat large stocks? Well, that's far weaker than many of the other so-called anomalies, the findings of value, momentum, a few others in the finance literature. It's kind of the weak sibling to those. I immediately went on a bad 15, 20-year run after it was discovered, has come back somewhat since then. But if you look at it through time, has other quirks almost all happens in January. That's not necessarily terrible, but it's a little weird.”
2015-02-21 · Masters in Business · Masters in Business: AQR Scott Cliff Asness (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“On that premise. If anything, that's the core premise of theirs. And I am certainly a believer in that. The small firm effect, though, is exactly what it says. It doesn't buy small cheap. It buys all.”
2015-02-21 · Masters in Business · Masters in Business: AQR Scott Cliff Asness (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“The first question is Cap M tries to adjust for that with beta some of the early studies said maybe we're measuring risk wrong, maybe the betas are really higher. That got you a little bit not much. Maybe it's a liquidity premium. There are stories. But basically, there's one thing I don't want to confuse it with. Small value stocks. You buy cheap small stocks, at least in the data that's unassailable. Going forward, as always, will history repeat? I believe it will there, but I can't prove it.”
2015-02-21 · Masters in Business · Masters in Business: AQR Scott Cliff Asness (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“You're exactly right. You needed the recent research. And so let me take people a little bit back. This was the first crack in the armor of the famous capital asset pricing model back in the inefficient markets, if you will, back in the early 1980s, a guy named Ralph Bonds, who was a pharma student also Found the first version that I know of, there might have been others, of the small firm effect, that after adjusting for the famous Cap M beta, small stocks beat large stocks. And why should that be? And there have been all kinds of theories about this.”
2015-02-21 · Masters in Business · Masters in Business: AQR Scott Cliff Asness (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“That was the blog entry title. The title of the paper was Size Matters if you control your junk. It was a bit of a double entendre. Got it. Which I've been apologizing for, though so far. Have you really? No, well.”
2015-02-21 · Masters in Business · Masters in Business: AQR Scott Cliff Asness (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“Better than a big negative. Negative 1%, if inflation's minus 2%, that's still 1% better than inflation. But if you on your diversified, broadly stocks and bonds portfolio, if instead of two and a half, which is disastrous versus history, we were expecting zero or negative, I'd have to start. There, I'd be screaming bubble. Here I'm screaming more expensive than history. Lower your expectations.”
2015-02-21 · Masters in Business · Masters in Business: AQR Scott Cliff Asness (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“Likely the result of a bubble. Very, very hard for me to imagine a world where people would rationally own stocks and bonds say, and we've seen some negative nominal returns. On bonds, those are places that have convenient yields, meaning keep my money protected. Or maybe they're worried about deflation and they're actually expecting positive real returns. Right. Because if deflation comes in a small negative nominal.”
2015-02-21 · Masters in Business · Masters in Business: AQR Scott Cliff Asness (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“It's about as bad as it's ever gone forward. And Certainly realized returns. Anything can happen even over longer periods than people think. I agree with that. If we ever had negative expected returns, I'd be willing to use the word bubble there. We talked about that earlier because negative.”
2015-02-21 · Masters in Business · Masters in Business: AQR Scott Cliff Asness (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“90% and 90%, they usually don't happen at the same time. 90% stinks, another 90% bad, 90% being bad, stinks. 290%'s really, and now I'm not being quantitative at all, really, really stinks. We find the 640 portfolio is approximately as bad as it's ever been, prospectively.”
2015-02-21 · Masters in Business · Masters in Business: AQR Scott Cliff Asness (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“90% of the time. Bonds. This shocks some people are really not worse than stocks. They're more expensive than about 90% of the time. The difference between stocks and bonds, bonds are bumping against zero, so they're more dramatic looking. But that difference in spread is roughly average. But they're both really low.”
2015-02-21 · Masters in Business · Masters in Business: AQR Scott Cliff Asness (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“Well, everything's going to be wrong to you and I, but I got to relearn. It's like it's a lot of work. I'm relearning division, but that's not, let me get back to it. It's two and a half percent real on 60 40. The other numbers are all around it too, so we don't forget this exact anyway. Long term, again, rounding, you made about 5% real on 6040 for about 100 years. So we would forecast you make half the real return as you've made historically. Stocks are priced more expensively. Again, Schiller PE or dividend yield plus expected growth, whatever model you like. Call it roughly about more expensive than about 90% of the last hundred years.”
2015-02-21 · Masters in Business · Masters in Business: AQR Scott Cliff Asness (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“It's very humbling. Your kids are completely unimpressed that you're a quant of any kind. Like, dad, you're doing it wrong. That's not how I teach you. Well, the”
2015-02-21 · Masters in Business · Masters in Business: AQR Scott Cliff Asness (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“Now Bonds, it bounces around column 50 basis points, a tiny real expected yield. So take your classic 6040 portfolio. 60% of Or 400 basis points, 40% of 50 rounded. It's about two and a half percent real.”
2015-02-21 · Masters in Business · Masters in Business: AQR Scott Cliff Asness (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“On a nominal basis all the time. Surprise inflation tends to hit all assets, including stocks, but long-term steady-state inflation is kind of what stocks are.”
2015-02-21 · Masters in Business · Masters in Business: AQR Scott Cliff Asness (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source