iShares Russell 3000 Index (IWV)

All Comments on IWV

  • commenter
    Richard Shaw
    Feb 01 04:49 PM
    My Website
    International ETFs: Correlations with Broad U.S. Market [view article]
    Simon,

    Here's the story on the correlations.

    First, the language on the site tool on which I based my belief that Barclay's is correlating returns as they should be is shown below. I have no reason to believe that they did the math incorrectly -- it's just the data on which they calculate that should reasonably be questioned.

    "Correlation: A measurement of how closely a portfolio's performance correlates with the performance of a benchmark index, and thus a measurement of what portion of its performance can be explained by the performance of the overall market or index. Readings for correlation may range between -1 and +1, where +1 means perfect positive correlation and -1 means perfect negative correlation."

    Second, I took the position as the #1 ETF sponsor in the world with enormous credibility at risk by offering the tool in their "financial professional" section of their site, they would have validated their methodology. However, you correctly note that State Street numbers vary. I have previously discovered and published a report indicating that the State Street site which does not correlate returns (they correlate prices only – verified by phone contact with State Street) and therefore is not useful for my purposes or relevant to the correlation focus of this article.

    Third, I did not recalculate by hand on my own, but I did contact the Barclay's wholesaler division to verify their methodology. I gathered information from two wholesalers after telling them about the challenge to my published numbers, about the difference between their numbers and those from State Street, and how the State Street tool does not correlate returns. They assured me that the Barclay's tool correlates returns not prices, and I am confident that their math formula must be right.

    Therefore, I rest comfortable that the numbers are correct. If the 1-year numbers look funny, it may be the shorter time intervals produce result less in step with numbers from longer periods of time.

    I encourage you to do some manual calculations with the Yahoo data source and Excel method listed in my other correlation article. etf.seekingalpha.com/a...

    If numbers you calculate contradict the figures from Barclay's we can take it up with them at another level. If you would like to call them yourself, they can be reached at 800-474-2737.

    State Street numbers are irrelevant for the purposes of this article and should be ignored. As for PortfolioScience.com, I cannot comment, because I do not have access to their tool and did not sign up for their free trail.

    As a practical matter, virtually all of the data we use in investment decisions is provided by somebody who we rely upon to use reasonable care – correlations, portfolio statistics, even basic things like prices and dividends, and of course narrative reports and news. We live in a complex world that requires that we rely on each other and we cannot do everything from the ground up individually. This is one of those cases. I’m going to go with the assumption that the #1 ETF company with a portfolio construction tool based in part on correlation has been developed properly and with care. If someone can show me a specific error in their tool, I will change, but until then, life is too short.

    I appreciate you comment and the fact that you caused me to voice verify the Barclay’s methodology with their staff.     Reply
  • commenter
    Richard Shaw
    Jan 30 10:56 PM
    My Website
    International ETFs: Correlations with Broad U.S. Market [view article]
    Simon, I warned against using black boxes in my other article and possibly I have been sucked in again by using the iShares black box. I believed them when they said they correlate returns and they are doing if for their own products. Maybe I have been a sucker twice, and maybe not. I will run some manual tests to see how they come out myself. It is also important to note that the period used has an impact on the results too (whether by minute, by hour, by daily, by week, my month, by quarter, etc).

    Tomorrow, re-examine the iShares site, cross-check a few using the technique described in my other article and post a response of some kind. Thanks for sticking with it.     Reply
  • commenter
    simon
    cassidy
    Jan 30 10:47 PM
    International ETFs: Correlations with Broad U.S. Market [view article]
    I hadn't realized how big the difference between correlations for returns and prices are. Thanks for directing me to the other article. However, the figures still seem off. When I ran a one year correlation for IWV and EFA using daily returns, the figure was .80. When using prices, it was .94. Both of these are a long way from the .09 IShares claims on their calculator. I'd guess that EPP, EEM, FXI, etc. are also off. These figures would drastically overstate how easy it is to develop a diversified portfolio. Reply
  • commenter
    Richard Shaw
    Jan 30 03:46 PM
    My Website
    International ETFs: Correlations with Broad U.S. Market [view article]
    The first issue is that the State Street online correlation tool measures price correlation, whereas the iShares online correlation tool measures return correlation. They are different measures and develop quite different results.

    Price correlation tends to be used by short term traders to find highly correlated securities that experience temporary mispricing for arbitrage opportunities. Return correlation is used by long-term investors to find low correlation securities to reduce portfolio risk.

    This matter is discussed more fully in a prior article: etf.seekingalpha.com/a... which also provides instructions for hand calculation of correlations. You might try recalcuating one or two of the numbers yourself to be certain of the numbers.

    The correlation figures in this article were taken directly from the iShares online calculator to save time. They do, however, specifically state on their site that they measure correlatiion of returns, unlike State Street whose site says they correlated prices (and upon inquiry verify that they do not correlate returns).     Reply
  • commenter
    simon
    cassidy
    Jan 30 01:13 PM
    International ETFs: Correlations with Broad U.S. Market [view article]
    Hi Richard,

    I've been looking for correlations similar to the ones you provided but have come up with vastly different numbers. I don't think that any of the ETFs you mention should have a correlation (based on 1 year) to the U.S. of close to zero. PortfolioScience.com lists most of these correlations as above .50, while State Street lists some at above .90 (!). While I'm not sure how accurate Portfolio Science is, State Street and IShares seem way off. Any thoughts on this? I'd love to know what the right numbers are.

    Simon     Reply
  • commenter
    Geoff
    Considine
    Jan 28 06:42 PM
    My Website
    Select Foreign Index ETFs As Defensive Assets: Anything Doing? [view article]
    Eli:

    Thanks for the clarification. Actually, the more interesting point here is that Roger is saying that he is NOT suggesting that these country-index funds (any of them) provide good protection from a broad domestic downturn. This is, indeed, exactly what my analysis shows. This is a centrally important point. Roger is saying that well-chosen equities from these countries are the way the he is using foreing investments to hedge against a broad domestic decline---not the index funds. Many people will read Roger's original article and infer that he is talking about using index ETF's or other index funds from the countries that he discusses, but he has pointed out that this is not what he means. Obviously, my analysis agrees. Many investors think that simply investing in other countries will confer effective protection from a U.S. market decline. My analysis agrees and apparently Roger also agrees. This runs counter to what many investors think and counter to what many investment writers write--this is a very important idea.     Reply
  • commenter
    SA Editor
    Eli Hoffmann
    Jan 28 04:47 AM
    Select Foreign Index ETFs As Defensive Assets: Anything Doing? [view article]
    Hi Roger, Geoff, et al,

    Being the editor responsible for reposing Roger's original piece, let me step in here and hopefully clarify things. In Roger's original article, which we gave the title "Four Countries That Could Weather a U.S. Market Deterioration," he names four countries he feels may be a safe haven in the event of an extend U.S. market deterioration. As Roger points out, his article does not get in to the specifics of how to capture exposure to those countries.

    One of the things Seeking Alpha editors do when reposting authors' work, where appropriate, is to offer the reader related links, be they hyperlinks to other pieces dealing with the same issue, earlier articles by the same author, links to relevant press releases, or in this case a list of U.S.-traded ETFs that a reader might use to invest in the regions Roger mentioned.

    In doing so, I originally erred and included the iShares MSCI Netherlands (EWN) ticker where Roger had never mentioned the Netherlands. This was promptly pointed out by a reader, and I deleted that ticker from the Related ETFs. The other tickers, iShares MSCI Australia Index Fund (EWA), iShares MSCI Sweden Index ETF (EWD), Irish Investment Fund Inc. (IRL), remain there.

    I hope this clarifies things.     Reply
  • commenter
    testguy
    Jan 26 09:45 PM
    Select Foreign Index ETFs As Defensive Assets: Anything Doing? [view article]
    I read both Roger's and Geoff's blogs/sites. It seems to me you guys are from different background. Roger shows not much interest in statistics analysis as Geoff although he did mention the correlation tools several times on his blog, and he seems to base his portfolio management mostly on fundamental analysis. However, if you believe in numbers don't lie, it's very difficult to disagree with Geoff here as to what happned during the last 3-5 years to these foreign foreign country themes. Reply
  • commenter
    Geoff
    Considine
    Jan 26 09:55 AM
    My Website
    Select Foreign Index ETFs As Defensive Assets: Anything Doing? [view article]
    Hi roger--my intent is not be pedantic here. Many people equate an investment in a COUNTRY with investment in a broad equity index fund for that country. Reply
  • commenter
    Roger
    Nusbaum
    Jan 25 06:01 PM
    My Website
    Select Foreign Index ETFs As Defensive Assets: Anything Doing? [view article]
    since i literally never mentioned those funds, I am not sure how to answer your question. My post was about countries not ETFs. Again, <em>literally<... never mentioned them so what wasn't clear? Your question needs to go to the SA editors as to why they added those ETFs. Reply
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