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Robert D Arnott

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Nationality
  
U.S.

Role
  
Entrepreneur


Name
  
Robert Arnott

Institutions
  
Research Affiliates

Fields
  
Finance

Robert D. Arnott httpswwwresearchaffiliatescomcontentdamra


Alma mater
  
University of California at Santa Barbara

Education
  
University of California, Santa Barbara

Books
  
The Fundamental Index, Active Asset Allocation

Residence
  
United States of America

Indexpionier robert d arnott


Robert D. Arnott (born June 29, 1954) is an American entrepreneur, investor, editor and writer who focuses on articles about quantitative investing. He serves as chairman and chief executive officer of Research Affiliates, LLC, which advises on over $160 billion in institutional investment assets, as of year-end 2015. He is married with four children. He edited CFA Institute's Financial Analysts Journal from 2002–2006, and has edited three books on equity management and tactical asset allocation. He is a co-author of the book The Fundamental Index: A Better Way to Invest, and co-editor of three other books relating to asset allocation and equity market investing.

Contents

Arnott has also served as a Visiting Professor of Finance at the UCLA Anderson School of Management, on the editorial board of the Journal of Portfolio Management, the product advisory board of the Chicago Mercantile Exchange, and the Chicago Board Options Exchange. He previously served as Chairman of First Quadrant, LP, as global equity strategist at Salomon (now Salomon Smith Barney), president of TSA Capital Management (now TSA/Analytic), and as vice president at the Boston Company.

Arnott has received seven Graham and Dodd Scrolls and Awards, awarded annually by the CFA Institute for best articles of the year, and has received three Bernstein-Fabozzi/Jacobs-Levy awards from the Journal of Portfolio Management and Institutional Investor magazine.

Writing

Arnott has published over 100 academic papers in refereed journals. Topics of these papers have included mutual fund returns, the equity risk premium, tactical asset allocation, and alternative index investing.

  • 2000, "Investment Management Reflections," with Andrew L. Berkin and Jia Ye. This paper argued that not only did 75% of actively managed equity mutual funds underperform the Vanguard S&P 500 Index Fund but that after taking into account taxation, 66 out of the 71 mutual funds in the sample underperformed. A later study that looked at the 1990s found that 322 out of 355 mutual funds in the sample underperformed the Vanguard S&P 500 Index Fund after tax.
  • 2002, "What Risk Premium is 'Normal'?" with Peter Bernstein. This paper argued that much of previous stock market returns had come from price-to-earnings ratio expansion and dividend yields, the former of which is unsustainable and the latter of which is historically low. Therefore, stock market returns will be lower in the long-term than they have historically been. Arnott and Bernstein were awarded the Graham and Dodd Award for excellence in financial writing for this article.
  • 2003, "Surprise! Higher Dividends = Higher Earnings Growth," with Cliff Asness. This paper stated that against traditional theory, that the more a public company paid out in dividends, the greater that company's earnings grew. Results were statistically significant and robust with respect to time period and after controlling for the investment-to-GDP ratio, earnings yield, and the slope of the yield curve.
  • 2005, "Fundamental Indexation" with Jason Hsu and Philip Moore. This paper introduced the idea of weighting indices by fundamentals instead of capitalization, stating that indices weighted by fundamentals tend to outperform indices weighted by capitalization with similar volatility. This paper was the recipient of the William F. Sharpe best-index related research paper award. Research Affiliates' fundamentally based indexes won the award for the most innovative benchmark index.
  • 2008, The Fundamental Index: A Better Way to Invest. This book, published by Wiley Press and co-authored with Jason Hsu and John West, examines in detail how the Fundamental Index approach to investing can overcome the structural return drag created by traditional capitalization-weighted index strategies.
  • 2009, "Clairvoyant Value and the Value Effect" with Feifei Li and Katy Sherrerd. Using the prism of "clairvoyant value" - the net present value of all future cash flows on an investment, which is only known long after-the-fact for stocks in decades past - this paper and related subsequent paper demonstrate that the market does a superb job of differentiating which stocks deserve premium valuation multiples, but then pays too much for them. Selected as the lead article in the Spring 2009 Journal of Portfolio Management.
  • 2012, "Demographic Changes, Financial Markets, and the Economy" with Denis Chaves. Spanning sixty years of data in two dozen economies, this paper demonstrates that demography plays a very important role in shaping GDP growth and capital market returns. It strongly suggests that the developed world should prepare for slower GDP growth in the years ahead, and softer stock and bond returns in the 2020s and beyond. This paper was selected as the lead article for the January/February 2012 issue of the Financial Analysts Journal, and went on to win a Graham and Dodd Scroll.
  • 2013, "The Surprising Alpha from Malkiel's Monkey and Upside-Down Strategies" with Jason Hsu, Vitali Kalesnik, and Phil Tindall. This paper documents that many of the popular so-called "smart beta" strategies work just as well, if not better, when turned upside-down, with their smallest and largest holdings reversed. In so doing, the paper demonstrates that the key to the success of these strategies is not the advertised method of the strategy, but the mere act of breaking the link between a stock's price and its weight in the portfolio. This paper was one of three winners of a Bernstein-Fabozzi/Jacobs-Levy Award, as one of the best articles in 2013 in the Journal of Portfolio Management.

    • Research Affiliates, LLC

    In 2002, Arnott founded Research Affiliates, a Newport Beach, California-based investment management firm. As of June 30, 2016, about $161 billion in assets are managed worldwide using investment strategies developed by Research Affiliates. The firm has been involved with fundamentally based indexes since mid-2004 and has worked with the FTSE Group to create indices based on this methodology.

    On January 8, 2006, Research Affiliates sold a minority interest in the company to Nomura Asset Management.

    In November, 2009, Research Affiliates was granted a patent for their index methodology that selects and weights securities using fundamental measures of company size. Laise, Eleanor (November 18, 2009). "Indexing Patent to Test Fund Firms". The Wall Street Journal. 

    Political contributions

    Arnott has given $750,000 to support The Club for Growth, a conservative anti-tax group. Arnott considers himself a libertarian, and opposes the Patient Protection and Affordable Care Act. In 2015, Arnott donated $100,000 to America's Liberty PAC, a political action committee formed in support of Rand Paul's 2016 presidential bid.

    Education

    Arnott graduated summa cum laude from UCSB in 1977 in economics, applied mathematics and computer science. While a high school student in 1970, he attended the Summer Science Program.

    References

    Robert D. Arnott Wikipedia
    (Text) CC BY-SA