Yesterday’s blog entry reported on an e-mail sent to me by academic researcher Wade Pfau on January 21, 2011. The text of my response follows:
I would of course be thrilled if you called the paper “Valuation-Informed Indexing.”
There is no question in my mind that the paper MERITS inclusion in the Journal of Finance. I have no idea how these things are decided, so I have no idea whether they would take it. But this is as new as it gets and as important as it gets and as solid as it gets. So by rights it should be in the #1 journal.
My next e-mail to Wade was sent on February 22, 2011. The text follows:
I came across this
today. Ed is a great guy. He participated in a long interview/discussion with John Walter Russell and me at the old SWR Reseaerch Group board a good number of years ago. Actually, all community members were welcomed to participate. But the discussion was boycotted and those who showed an interest in participating were intimidated into not doing so. All the same, Ed and John and I had a great time talking about all the various issues.
Ed’s new book looks like it is going to be a barn-burner!
Wade responded the same day. He said that he intended to read both Easterling’s old book and the new one.
His e-mail stated: I’ve been plugging away with the valuations stuff. No matter what I try, valuations-based strategies tend to produce the same or greater returns at lower risk than fixed allocations. I’m using a number of formal risk measures to show this now.”
He also noted that Felix Salmon has written a review of his safe savings rate paper.
In a follow-up e-mail, Wade said that he did not plan to use my terminology of referring to allocation shifts based on valuations as “strategic” rather than “tactical,” which is the common practice, but said that he wanted to make note of the distinction in a footnote to the paper.
In my response, I noted that Felix has once written a kind review of The Stock-Return Predictor.
In his response, Wade linked to Felix’s review and commented “Yes, that’s a good one.” He observed that Felix did not refer to the allocation shifts as “market timing,” and offered the view that this is “nice to see.”