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About Me
I'm a financial economist and I currently serve as Head of Global Economic Research Team with the Vanguard Group--the team that develops Vanguard's long-term and cyclical economic outlook. Prior to my current role, I held portfolio construction, risk management, retirement research, and consulting roles with Vanguard, BlackRock, SSGA, and other financial services institutions. Main research areas have included active portfolio construction and management, direct indexing, tax-aware investing, and household finance. You can find working papers and publications below.
Publications and Working Papers
New & Coming Soon
(NEW) AI, demographics, and the U.S. economy: Quantifying the coming tug-of-war, Vanguard Whitepaper, 2024
The U.S. economy's coming decade will be shaped by a tug-of-war between artificial intelligence (AI) and demographics-driven deficits. The victor--and its margin of victory--will determine whether economic growth exceeds its disappointing pace since the global financial crisis or slows further. We generate this insight with a framework that can quantify the impact of slow-moving supply-side forces, or megatrends, on the economy and financial markets.
(NEW) Tax-loss harvesting: Why a personalized approach is important (with Joel Dickson and Tom Paradise), Vanguard Whitepaper, 2024
The value of tax-loss harvesting (TLH) varies significantly across investor characteristics, investor behavior, and market environment. By engaging in TLH in the 'optimal' fashion--customized to the investor characteristics and market environment--investors can improve their TLH alpha. Based on net-worth-based investor profiles, we find this improvement to range between 47 and 127 basis points.
Active Management & Portfolio Construction
Maximum Cumulative Underperformance: A New Metric for Active Performance Management (with Marvin Ertl), Vanguard Working Paper, 2024
We propose a new metric useful for monitoring an active fund's performance: Maximum Cumulative Underperformance (MaxCU). Information ratio, tracking error, investment horizon, and, especially, the market return environment play an important role in determining MaxCU. A systematic understanding of MaxCU can help inform optimal allocation decision to actively managed funds (ex ante) and manager retention/replacement decisions (ex post).
Negative Convexity in Municipal Bonds: The New Rate Regime and Active Management (with Cecil-Francis Brenninkmeijer, Justin Ferrera, and Nathan Will), Vanguard Whitepaper, 2023.
Decade-long lower-for-longer rate environment + desire for higher returns + inflationary regime (and Fed hikes) = current environment where sound risk management of negative convexity becomes front and center in active muni investing.
How Inefficient is 1/N for a Factor Investor? (with Antonio Picca, Shaojun Zhang, and Minzhi Zhu), Journal Of Investment Management, 2023.
Once realistic transaction costs and investment constraints are accounted for, no alternative optimization strategy consistently dominates the simple 1/N allocation in factor investing. Successful factor timing is required in order for optimization-based strategy to outperform 1/N.
Waiting for the Next Factor Wave: Daily Rebalancing around Market Cycle Transitions (with Antonio Picca), Journal of Portfolio Management, 2021.
Factor premia could have been doubled if investors were rebalancing their factor portfolios daily, instead of monthly, during market cycle transitions. Knowing when to rebalance aggressively is a prized skill for factor investors.
Toward Regime-Aware Risk Forecasts, Journal of Portfolio Management, 2022.
Anchored to either slow-moving or fast-moving time series, industry-standard risk models tend to generate inaccurate forecasts when volatility regime changes. By real-time monitoring cross-sectional dispersion of forecast accuracy of diverse model specifications, it is possible to engage in timely and disciplined transitions between slow-moving and fast-moving models.
Model Risk in Risk Models: Quantifying Statistical Uncertainty in Active Risk, Journal of Portfolio Management, 2021.
Industry-standard risk model's output is a point forecast of the future volatility with embedded uncertainty around it. This uncertainty is about 20 to 30 % of the forecast itself. This ratio is useful for informed risk-taking, especially in times of volatility regime change.
Balance Sheet Adjustments During the 2008 Crisis (with Zhiguo He and Arvind Krishnamurthy), IMF Economic Review
We investigate how the balance sheets within the financial sector adjusted during the 2008 crisis, as mortgage- and asset-backed securities (MBS and ABS) shifted around the system and unconventional monetary policies were introduced. Hedge funds delevered significantly, while commercial banks levered up to absorb the MBS and ABS.
Tax-aware Investing
Tax-Loss Harvesting: An Individual Investor's Perspective (with Joel Dickson and Tom Paradise), Financial Analysts Journal, 2021.
Tax alpha is as diverse as there are diverse investor profiles, ranging from effectively zero to well above 300 bps, and is quite predictable. This calls for a thoughtful customization on 1) how much to allocate to tax-loss harvesting (TLH) strategy and 2) whether to harvest losses with direct-indexing.
Your Mileage may vary: Setting realistic tax-loss harvesting expectations, Vanguard Financial Planning Perspectives
Tax-Loss Harvesting: A portfolio and wealth planning perspective, Vanguard Whitepaper
Optimal Tax-Loss Harvesting Implementation (with Alan Cummings and Tom Paradise), Journal of Beta Investment Strategies (Special Issue on Direct Indexing), 2022.
Effectiveness of a TLH strategy varies significantly over two margins: 1) breadth of loss harvesting universe (from sector funds to individual securities); and 2) frequency of harvesting (from annual to daily). Daily scanning for harvesting with individual securities reaches maximal TLH effectiveness in all volatility environments.
Personalized indexing: A portfolio construction plan (with Alan Cummings, Tom Paradise, and Brennan O'Connor), Vanguard Whitepaper, 2022.
We examine how to use direct indexing (DI) by answering two common questions confronting prospective investors. Question 1. How do investors create space for DI in their portfolios, and how much customization can they pursue with DI? Question 2. What is the optimal tax-loss harvesting scanning frequency for capital-gains-rich DI investors?
Expected Loss Harvest from Tax-Loss Harvesting with Direct Indexing (with Alan Cummings and Tom Paradise), Journal of Beta Investment Strategies (Special Issue on Direct Indexing), 2023.
For direct indexing investors, the first years' volatility environment holds the key to the overall tax loss harvesting experience. Whether the first years overlap with a bear market determines the total loss harvest potential and the loss harvest contour over the long-term. Those who prize consistency in loss harvest may achieve it with additional cash contributions.
Retirement Research & Household Finance
The retirement readiness outlook is mixed for Americans according to the Vanguard Retirement Outlook (VRO)—a comprehensive analysis that evaluates retirement readiness for a nationally representative sample of American workers. While retirement security appears to be within reach for some Americans, more progress can and should be made for others; VRO sheds light on both.
Home is Where Retirement Funding is (with Kate McKinnon and Joana Rocha), Vanguard Whitepaper, 2023.
Examining American Community Survey migration records, we show that generations of retirees may have tapped into housing wealth by relocating to a cheaper housing market, extracting about $100,000 to shore up retirement funding. We estimate that one in every four retirees may be able to benefit from using this strategy over the next 10 years.
Media: AXIOS; Barron's; CNBC; Money; Morningstar; NASDAQ; ThinkAdvisor;Yahoo!Finance; FA Magazine
Sustainable Withdrawal Rates in Retirement: The Importance of Customization (with David Pakula), Vanguard Whitepaper, 2022.
Sustainable withdrawal rates can vary considerably, depending on the levels of desired bequests and portfolio depletion risk, and asset allocation, highlighting the need for customization rather than relying on a single rule of thumb.
Media: US News
Sustainable Withdrawal Rate by Return Environment: A Time-Varying Bayesian Analysis (with David Pakula and Andy Clarke), Journal of Retirement, 2022.
We perform a scenario analysis on sustainable withdrawal rate (SWR) for investors in today's environment: 2.8% if stock-bond correlation turns positive, inflation and bond market volatility rises, and inflation remains elevated; and 3.3% in the best case scenario. All other SWRs require a departure from the consensus return outlook.
What can new retirees withdraw from a portfolio, Vanguard Portfolio Perspective
Safeguarding Retirement in a Bear Market (with Andy Clarke), Vanguard Whitepaper, 2020.
We quantify the impact of "sequence-of-return" risk--the risk of receiving a concentrated series of poor returns--on newly retired investors. They are 31% more likely to outlive their wealth, have 11% lower retirement income streams, and/or leave 31% smaller bequests.
Media: FA Magazine; CNN
On the Role of Subjective Valuation in Housing Investment, Northwestern University Working Paper
During the housing boom of the 2000s, owner-occupants' decision to make future housing investments--remodeling and investment property purchase--was driven by the strength of appreciation on their primary residence. Consistent with the investors extrapolating the housing boom into the future, this effect was stronger during the frenzy (mid-2000s) and more pronounced for younger investors.
Word of Mouth and Investments: Evidence from New Neighbor Assignments, Northwestern University Working Paper
Word-of-mouth effect contributed to the formation of the mid-2000 housing bubble. Existing residents of a community were 24% more likely to purchase investment properties once an experienced real estate investor moved into the community; this effect was particularly strong during the 2002-2006 period and especially in the "sand" states (Arizona, California, Florida, and Nevada) where the housing bubble was most pronounced.
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