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Arnott and Asness: Can You Time Strategic Beta?

Rob Arnott and Cliff Asness agree on many fronts, but they have different views on how carefully you should consider valuation when deciding to invest in a factor strategy.

Jeremy Glaser 21.07.2016

The second day of the Morningstar conference held in June in Chicago kicked off with a conversation between AQR's Cliff Asness and Research Affiliates' Rob Arnott moderated by Morningstar's Ben Johnson.

The two investors were picking up in person a recent debate they've been having about the right way to invest in strategic beta or factor strategies. John Rekenthaler covered the basics of their disagreement in a recent article, but in short Arnott thinks investors need to keep valuation top-of-mind when investing in any strategy, while Asness thinks diversification is more important.

The first point of discussion was just how efficient markets really are. Asness described himself as being "courageously in the center" of the efficient/inefficient spectrum saying markets are highly efficient over the long term but that they are nowhere near perfect. Arnott is much more skeptical of efficient markets saying it is hard to believe prices reflect all available information in every market and every minute of every day.

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About Author

Jeremy Glaser  Jeremy Glaser is the Markets Editor for Morningstar.com.

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