The US economy grew a bit faster in September, according to today’s delayed update of The Chicago Fed National Activity Index, a macro benchmark based on 85 indicators. “The index’s three-month moving average, CFNAI-MA3, increased to –0.03 in September from –0.15 in August, marking its seventh consecutive reading below zero,” the Chicago Fed reports. Although the expansion remains a touch “below trend,” as indicated by CFNAI-MA3’s marginally negative value, the current -0.03 level is the highest since February. That’s a sign that economic growth, while still moderate, shows no imminent signs of deterioration, or so the September numbers suggest.

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Restoring Value to Minimum Variance
Lisa R. Goldberg (University of Calif., Aperio Group), et al. | Oct. 2013
A long-only investable minimum variance strategy outperformed the S&P 500 over the four decades from January 1973 to December 2012. Through the lens of a factor model, we show this outperformance can be largely attributed to implicit style bets. Specifically, minimum variance has thrived by tilting away from size and volatility and toward value. As funds have poured into minimum variance in the wake of the financial crisis, and plausibly as a consequence of this trend, the value tilt has disappeared and a momentum tilt has emerged. This suggests that the cost of entry to minimum variance is at an historic high. We show how the value tilt can be restored to minimum variance by targeting specific exposures, and that there was a substantial long-term benefit to the restoration at most recent points of entry to the strategy.

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