YouSaid · the spoken record

William Sharpe

lines on the record: 157
first: 2017-06-02
most recent: 2017-06-02
sittings or episodes: 1
sources: podcast

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“It's easy. I mean, it's easy. You know, it's not without information because it has a good thing in the numerator and has a bad thing in the denominator. But it's just not as sophisticated as it should be in a lot of applications.”
2017-06-02 · Masters in Business · Interview With William Sharpe: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“Enge funds, because if they're really truly hedged, 100% hedged, almost none are. Of course none are. Most of them have some beta relative to the stocks and some beta relative to bonds.”
2017-06-02 · Masters in Business · Interview With William Sharpe: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“But again, but the only case in which for a single manager In a multi managed portfolio, the sharp ratio may be applicable is in a hedge fund that has zero beta. If it has zero beta, now the other measure which Jack Trainer used Was the same in the numerator, but the denominator had beta. As opposed to total risk. So it had, in effect, the part of the risk that's due to the market. And there are some arguments in terms of capital asset pricing. That can be helpful. But in terms of just you say, look, here's my whole portfolio the last 20 years, I averaged X percent and the standard deviation was Y, and the Treasury, what do you think? And I can compare that, say, with investing in. Say a total stock market fund if that's your comparison. and say which sharp ratio is higher.”
2017-06-02 · Masters in Business · Interview With William Sharpe: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“The differential versus data over residual risk, let's call it, yeah, something like that. And again, there are variations on that theme. Nobody's ever given a name to those kinds of measures.”
2017-06-02 · Masters in Business · Interview With William Sharpe: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“Well, so let me just finish that thought. So what you can do is come up with a benchmark. So this is a growth manager. I'll get a growth index fund as a benchmark. And in the numerator, I'll put on average how did this fund do minus how the index fund did. And in the bottom, I'll put the variability between the two. In other words, what's the variability of the difference”
2017-06-02 · Masters in Business · Interview With William Sharpe: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“We've got computers now. We don't need to restrict ourselves to one. So then you go to Well, what if this is not my whole portfolio but a piece of it If it's one fund and I've got 20, or if it's one investment manager, my pension fund, I've got 100 And this is not the right measure for that. So, how do people?”
2017-06-02 · Masters in Business · Interview With William Sharpe: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“Variability And so we'll talk about another issue with it, which is on the face of it. If you had to choose one number to evaluate an investment. Prospectively, after the fact, retrospectively, then it's not a bad number.”
2017-06-02 · Masters in Business · Interview With William Sharpe: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“So, in the numerator, the top of the fraction, you put my average return over the Treasury Bill. So, how much did I earn for taking risk? And in the bottom, you put, how much risk did I take? And the idea is the more return you got, the more reward per unit of variability, the better it was.”
2017-06-02 · Masters in Business · Interview With William Sharpe: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“And so the idea was, what did you get an expected return per unit of risk that you took? Or will take if it's forward looking. And my original setting was this is for a whole portfolio. And so the idea was you compare your situation with treasury bills, let's call it, the riskless asset.”
2017-06-02 · Masters in Business · Interview With William Sharpe: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“Because our sharp ratio is low, and my wife said, What? Yes, yes. So any event, so I'm glad they didn't say reward to variability. My claim to fame. It's kind of the, well, let me go back, the original context parallels the work of Jack Trainer's, which he jack went in a different direction But the idea was how do you evaluate ex post or anticipate ex-ante, but let's talk about ex post, how well you've done. And the idea was, I won't speak for Jack, my idea was to say, well, the expected return, if we're looking forward. Or the average return, if we're looking backward, is as a measure of goodness. That's a good thing. But there's also the issue what was the journey like all over the place relative to the volatility”
2017-06-02 · Masters in Business · Interview With William Sharpe: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“Well, and I can tell you my wife is an artist, so she's not deep into finance, let us say. And we were watching a sitcom, or no, it's not a sitcom, it's a drama, billions, which is about hedge fund manager, et cetera, which is sort of my guilty pleasure of that show. And they're sitting at the table, and one of the people at the hedge fund is saying, well, you know, we're losing customers”
2017-06-02 · Masters in Business · Interview With William Sharpe: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“And I'll expand on that. Somebody else, and I don't really know exactly who it was, started calling it the sharp ratio and the name stuck. Well, it certainly.”
2017-06-02 · Masters in Business · Interview With William Sharpe: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“First thing, I'm not maniacal as you might imagine. I called it, and I still think it's a better term, reward to variability ratio.”
2017-06-02 · Masters in Business · Interview With William Sharpe: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“And then the Wells work, they were money managers, so it was index funds and things of that sort. So they're very different gigs, if you will.”
2017-06-02 · Masters in Business · Interview With William Sharpe: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“Well, let me differentiate a little. The Merrill work with Jack Trayner and Gil Hammer and others. was we were basically providing services for institutional money managers like pension funds etc we did the first beta book where you could look up the beta of a stock We did some of the first performance measurement, analytic performance measurement. So this was Merrill Linge providing this service to large clients of theirs. So that was all on the performance measurement, if you will, side. And it's not like today.”
2017-06-02 · Masters in Business · Interview With William Sharpe: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“By the way, Mayor's work, you know, I haven't seen him for a while, but he's a very smart guy, and his work is excellent.”
2017-06-02 · Masters in Business · Interview With William Sharpe: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“And there'll be some period. And that's what go open a hedge fund. That's exactly right. Use that and say, and then when I lose, I close it and I open a new hedge fund. We know how that works.”
2017-06-02 · Masters in Business · Interview With William Sharpe: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“Yeah, you know, if I bet you know this, if I bet with you on Coin Flip. And I always call heads, there'll be some periods of 10 in a row. I won't win them all, but I'll win more than half.”
2017-06-02 · Masters in Business · Interview With William Sharpe: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“Yeah, and there's another argument that you sometimes hear, well, the smart active managers do better than the market. And yes, somebody has to be doing worse, and it's the dumb individual investors.”
2017-06-02 · Masters in Business · Interview With William Sharpe: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“Which a friend of mine, I won't bother you with his name. He's an academic who works in the industry now, has made that my arithmetic argument, which I referenced, which was arithmetic of active management, was the title of the piece. Well, but we smart institutions know when to buy a new issue. You know, there are issues coming and going. Repurchases, expirations of bonds, maturation, what have you. And some of us active managers can play that game and other indexers can't do it. So maybe, but...”
2017-06-02 · Masters in Business · Interview With William Sharpe: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“and over time it's pretty much averages out. But we got a lot of data. We've got really fast computers. We've got a lot of smart people. We've got a lot of good marketing people. So you're going to be hearing about this. And my friend Bill Faust that I mentioned earlier on said he never met a backtest he didn't like. Sure. Somebody will come along. If we had just done this the last 10 years, you would be so rich.”
2017-06-02 · Masters in Business · Interview With William Sharpe: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“And of course, one presumes eventually that really dumb people will say, I think maybe I'll buy an index fund and then the game's over for smart pay. But those factors, yes, what do we know? We know that there are extended periods when value beats growth. And their extended periods when growth beats value. And if you are oppression and can tell which is coming, then tilled away and have a good time and you'll be very wealthy. There's very little evidence that people can tell in advance what's coming next.”
2017-06-02 · Masters in Business · Interview With William Sharpe: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“They have to earn before it costs the same The other guys do and after cost they're going to earn less. Now, that doesn't mean that some of them may not routinely do better than the indexers. But if so, somebody's routinely doing worse. So that story, there's smart, that's the smart beta. There's sort of dumb. We indexers. And then there's the really dumb, who are the people on the other side of the trades with the smart beta people.”
2017-06-02 · Masters in Business · Interview With William Sharpe: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“And so basically that argument, and this gets to a very simple argument I wrote about years ago, If you take all the people who own shares in the US market, let's say. Put him in one room You say, here are the indexers, broad based market index, before costs. If the market does 10%, all every one of them will do 10%. The rest of the room, the active managers, I don't care if they're smart beta, yield tilt, you know, whatever. Some of them will do better, some of them will do worse. It has to be a zero.”
2017-06-02 · Masters in Business · Interview With William Sharpe: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“So there's a factor model and you tilt, you hold more exposure to yield, let's say, or to value than to growth. More exposure to small relative to large. And so all of those arguments say, you know, there are two classes of argument for those strategies. One is the market screws up. You know, and there are dumb investors who think growth stocks are so wonderful they overpriced them And there are smart investors who know that and underweight those growth stocks. And then there's myself and my friends who are in the middle.”
2017-06-02 · Masters in Business · Interview With William Sharpe: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“Relevant. Now, all that is what we've known about and written about for years called factor tilts. So you have a multi-factor model of French and everything, small cap value moment quality, blah, blah, blah.”
2017-06-02 · Masters in Business · Interview With William Sharpe: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“Really? I mean, beta is beta. We defined it in finance for decades as a measure of the extent to which a stock or something moves with the market, period. That's the definition.”
2017-06-02 · Masters in Business · Interview With William Sharpe: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“Was starting to really pick up. Look at value. Yeah, I actually, some while ago for some reason, I looked that up and I couldn't find any traces of it on the internet. So it was buried. But do you want to talk Smart Vader?”
2017-06-02 · Masters in Business · Interview With William Sharpe: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“And High yield stocks just relative to other stocks just went into a tailspin. I mean, it was one of those periods, we'd call them value stocks now maybe, but they just got cream by growth stocks for whatever reason. And we didn't have many clients and the clients we had sort of started departing. Finally, somebody turned out the light when they closed the door, and the yield tilt ton. Fund did not last very long. But I suppose that was one of the first institutional quote value funds.”
2017-06-02 · Masters in Business · Interview With William Sharpe: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“And for people who pay taxes to tilt in the other direction, so you can make that argument, and there were academic papers and then papers from Mert Miller and Myron Schultz saying that's not true or the evidence doesn't support it. In any event, so we brought to market this yield tilt fund. It was an institutional fund that had a dividend tilt, if you will.”
2017-06-02 · Masters in Business · Interview With William Sharpe: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“Well, they, I think, found that in that particular instance, I don't believe I was consulting with them then. I did consult subsequently for quite a while, and we did all sorts of things. I remember we developed a yield tilt fund. And there's an argument that can be made, and I made it in my textbook, and my colleague, Bob Litzenberger and Krishna Ramaswamy, then one of our PhD students did quite a bit of work on this, that if you have differential taxation of dividends and gains. As we did, and at the time the differential was big, then you can imagine a sort of a sorting out where it pays individuals and non-taxable entities to tilt away from market proportions towards higher yield. Because you don't pay taxes and they're priced presumably to reflect their inferior tax position.”
2017-06-02 · Masters in Business · Interview With William Sharpe: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“Samsonite, wherese class he had taken, I don't know. Chicago could have been gene farmer, but But in any event, Sorry, go back to the question we were asking.”
2017-06-02 · Masters in Business · Interview With William Sharpe: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“Institutional index funds Jack Bogle, of course, came along on the well I would call it personal side rather than institutionalism. It was a mutual fund.”
2017-06-02 · Masters in Business · Interview With William Sharpe: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“As opposed to doing an annual or semi-annual rebalance. Yeah. Or with a market-based portfolio, you only rebalance for new issues and things of that sort. If it's broad enough, so fortunately that idea, somebody at Wells Fargo figured that out. And so I believe that was their first implementation. Now, you mentioned the first, there was work going on at a bank in Chicago. I think Jack Tranor was involved in that. And there was also a venture that I was supposed to be on the board of, the Teamsters Union wanted to do an index fund, and we were going to establish, but that fell through for reasons having to do with the Teamsters Union. San Francisco. So I think Wells was if. Certainly one of the very first”
2017-06-02 · Masters in Business · Interview With William Sharpe: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“Well, because in the first place, it's not representative of the market, it's not consistent with the capital asset pricing model. Involves all kinds of turnover to try to balance everything back. Sure.”
2017-06-02 · Masters in Business · Interview With William Sharpe: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“Wells Fargo. At Wells Fargo. And they had come up originally with a scheme in which they had maybe 500 stocks, but they were equal weighted. Not in market cap weight Which had I known about it, I would have told him instantly was a really dumb idea.”
2017-06-02 · Masters in Business · Interview With William Sharpe: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“Okay, certainly. I'd become friends with Bill Fouse at Wells Fargo investment advisors. And he had talked to my class. And I had, of course, been pushing the idea of index funds or something equivalent. And I had a call out of the blue from a young man who had just finished an MBA program at Chicago, University of Chicago. Anne said, Well, look, you know, I think I've got this right. My dad runs Samsonite luggage company. And they have to find a manager for the pension fund, I believe it was. And I learned about the capital asset pricing all in all, and it seemed to me that Made sense just put this in the market somehow. And he said, Do you know anybody who can do that? And I said, well, so I put him in touch with Bill Faust.”
2017-06-02 · Masters in Business · Interview With William Sharpe: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“And we did a lot of over the years, certainly I was involved. The firm did a lot of research in some of my early work on the decumulation phase. Was done with Jason Scott and John Watson, two PhDs in the research at the firm.”
2017-06-02 · Masters in Business · Interview With William Sharpe: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“As an example, at retirement is this. If we do that, it's that. I'm trying to give them a chance to experiment and find something that makes sense for their situation.”
2017-06-02 · Masters in Business · Interview With William Sharpe: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“Of clients and assets And we try to bring to bear the whole idea was what I'd done at my former incarnations trying to bring Financial economics, let's call it broadly, to bear on that problem, you know, what we knew, what we thought we knew about markets, index funds being very attractive investments, et cetera, trying to help the accumulator, let's call it. Get some sense of the risk return tradeoffs in terms of if we do this portfolio, then the range of things that happen, in terms of the amount of money we'd have to buy an annuity, let's say.”
2017-06-02 · Masters in Business · Interview With William Sharpe: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“But what we settle down providing advice to all the employees in a firm once the firm signed up. And then providing management of accounts to a subset of the employees. Who wanted that and certainly my goal, and I think that of almost everybody in the firm from the start, and I hope still, is to do it at low enough cost to actually keep bread on the table. and maybe a little more than bread.”
2017-06-02 · Masters in Business · Interview With William Sharpe: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“Let me say first, I've been retired from the firm for quite a while. Right. So I don't really know much about what they're doing now. But basically, we actually went through, I think, depending on how you count four or five business plans. And there was a, we at one point were on the AOL side. We were going to do a direct to retail to call it. A lot of work. B2C and all the rest of that.”
2017-06-02 · Masters in Business · Interview With William Sharpe: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“The way these things happen, and Jeff said, I can take that chance. So we started with Jeff and then Craig brought in part-time really experienced CFO people, head of engineering. To help us get started and to help us find people to hire. Jeff went out beating the bushes to get venture capital. I went along on one or two of those presentations, decided it was too brutal for me. And so that's how it all came about.”
2017-06-02 · Masters in Business · Interview With William Sharpe: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“Tell you what, let's just at least talk to my friend Craig Johnson and Craig had a firm that came, he came out of the legal side, but they had developed a practice specializing in helping people bring ideas to fruition via startups. In particular, academic ideas. And so Craig and Joe and I talked about, well, let's see if we can't set up a firm to provide financial advice to people in 401k plans through their employer. So, this was very much accumulation phase to use the term I've used before. And more or less the rest is history. You mentioned Jeff Madge called Joe had had some contact with Jeff and said, I think Jeff would be great to lead this effort. And so we talked to Jeff. And I remember, I think it was Craig said, well, Jeff, I hope you understand that In a year we might replace you.”
2017-06-02 · Masters in Business · Interview With William Sharpe: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“Pretty much in the early 90s, and I went back to Stanford in'92. So I had time to work on anything I wanted to. In terms of my research, so I focused my research on that problem. And I was writing pieces. I had an early internet account back before. Most people knew what it was. I was writing little programs to put on the internet for people to use. And a friend of mine, Joe Grunfest, a professor of the law school at Stanford, said, let's have coffee. I've got an idea, so we did. And he said, you know, you're not going to affect enough. We need to start a firm. And I said, been there, done that. No, thanks very much.”
2017-06-02 · Masters in Business · Interview With William Sharpe: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“The time Honey, it's called editing. It gets better over time. That's it. I'll try to give it to you as I believe it happened. I had, as I mentioned earlier, I had a phase when I had a research slash consulting firm. Trying to help people managing large pension and endowment funds. And after I went back to teaching full-time, I decided that 401ks were for good or ill. The wave of the future and there were a whole lot of people who needed help.”
2017-06-02 · Masters in Business · Interview With William Sharpe: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“It'll be originally at my website if you just go online and say WF Sharp or something, you'll find And then, as I say, we may, it may get a website of its own at Stanford.”
2017-06-02 · Masters in Business · Interview With William Sharpe: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“Well, I'm not sure your standards for PhD dissertation. I'm not sure that there would be a lot new, I mean, you can certainly propose new. I mean, I, in this, I have techniques that nobody's ever used. I have constructs that nobody's ever implemented There are things in there that could give rise to new financial products and investment and insurance products. So I don't know about a PhD dissertation. I'm thinking more MSMA Financial engineering level. It's certainly not MBA level material.”
2017-06-02 · Masters in Business · Interview With William Sharpe: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“And I have a friend who does advise retirees, and I'm trying to see if I can get him to incorporate that in his practice.”
2017-06-02 · Masters in Business · Interview With William Sharpe: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source
“And the majority of them, as far as I can tell with the breakdown, the majority of graduates of those programs Go into, you guessed that Wall Street creating derivatives. Not a single one that I could find in the summary went into working with a financial advisor who's working with retirees or Near retirees, but I would hope that This would be in some sort of electives in those programs and or that good technical people would be able to go through my material, go through the programs, learn how to use them, and then provide the back office for, say, a financial advisor. And that's the reason I was meeting with this person yesterday. She's a single person and she doesn't advise any retirees, so it wouldn't work. But I'm trying to find”
2017-06-02 · Masters in Business · Interview With William Sharpe: Masters in Business (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source