C L I M B YO U R M O U N TA I N PRESENTATION The Existence and

C L I M B YO U R M O U N TA I N PRESENTATION The Existence and Persistence of Financial Anomalies

Harry Markowitz Harry Markowitz & Co. San Diego, CA John B. Guerard, Jr. McKinley Capital Management, LLC Anchorage, AK September 2019

Po r t f o li o C on st ru c t i o n a n d Me a su r e me n t Research Includes Markowitz (1959) Mean-Variance Portfolio Selection Sharpe (1964), Lintner (1965), Mossin (1966) CAPM Treynor and Mazuy (1966) CAPM Performance Measurement Fama (1970, 1976, 1991) Efficient Markets Hypothesis Ross (1976) and Roll and Ross (1980) APT Friend, Dhrymes, and Gultekin (1983) APT Blin, Bender, and Guerard (1997) APT Applied Investment Management and Portfolio Measurement Guerard, Markowitz, and Xu (2015) APT and Axioma Risk Models Tested 3

E xp e c t e d R et u rn s M o d e l in g t o E xp l o i t Fi n a nc i a l A n o ma l ie s Research Includes Dimson (1988) Size Anomalies Jacobs and Levy (1988) Financial Anomalies Bloch, Guerard, Markowitz, Todd, and Xu (1993) Financial Anomalies with the Markowitz Risk Model Blin, Bender, and Guerard (1997) Financial Anomalies and the APT Model Guerard (1997) CTEF Introduced with BARRA Risk Model McKinley Quant (2006) MQ Introduced with APT Risk Model Guerard, Markowitz, and Xu (2015) MQ and CTEF Updated and Verified for Axioma Stock Selection 4

F ig u r e 1: MC M Po r t f o li o C o n st r u c t io n a n d Mo d e li n g Pr o c e ss Product, Date or Footnote 5

P u b li c M o d e l E x p ec t ed R e t u rn s St o c k Se l ec t i o n Mo d e l, G LE R TRt 1 a0 a1EPt a2 BP t a3CPt a4 SPt a5REPt a6RBPt a7 RCPt a8 RSPt a9 CTEFt a10 PMt et , where: EP (1) [earnings per share]/[price per share] earnings-price ratio; BP [book value per share]/[price per share] book-price ratio; CP [cash flow per share]/[price per share] cash flow-price ratio; SP [net sales per share]/[price per share] sales-price ratio; REP [current EP ratio]/[average EP ratio over the past five years]; RBP [current BP ratio]/[average BP ratio over the past five years]; RCP [current CP ratio]/[average CP ratio over the past five years]; RSP [current SP ratio]/[average SP ratio over the past five years]; CTEF consensus earnings-per-share I/B/E/S forecast, revisions and breadth; PM price momentum; and e randomly distributed error term. 6

P u b li c M o d e l E x p ec t ed R e t u rn s St o c k Se l ec t i o n Mo d e l, G LE R Table 1: Top/Bottom decile spreads of FSGLER 1997 - 2011 Variable Top 3 decile spreads (t) EP BP FEP CTEF EWC GLER 0.42% (1.66) 0.50 (1.67) 0.50 (1.95) 0.72 (5.85) 0.70 (3.67) 1.12 (4.54) Annualized Top 3 decile spreads 4.43% 5.21 5.38 8.85 8.37 13.55 Top decile spread (t) 0.20% (0.66) 0.96 (1.45) 0.54 (2.02) 1.16 (7.27) 1.06 (3.55) 1.48 (3.67) Annualized Top decile spread 1.40% 9.54 5.11 14.54 12.36 17.19 Source: FactSet and APT. Past performance is not indicative of future returns. Guerard, J.B., Jr., Markowitz, H.M., & Xu, G. (2015). Earnings forecasting in a global stock selection model and efficient portfolio construction and management. International Journal of Forecasting, 31, 550-560. 7

P u b li c M o d e l E x p ec t ed R e t u rn s St o c k Se l ec t i o n Mo d e l, G LE R Table 1 cont.: Top/Bottom decile spreads of FSGLER 2003 – 2011 Variable Top 3 decile spreads (t) EP BP FEP CTEF EWC GLER 0.23% (0.80) 0.80 (1.78) 0.38 (1.33) 1.07 (6.48) 0.97 (5.79) 1.33 (3.98) Annualized Top 3 decile spreads 2.267 8.74 4.12 3.37 12.07 16.32 Top decile spread (t) 0.25% (1.08) 0.47 (1.57) 0.23 (1.39) 0.58 (4.88) 0.60 (1.83) 0.96 (4.59) Annualized Top decile spread 2.65 5.21 2.66 7.12 7.41 11.78 Source: FactSet and APT. Past performance is not indicative of future returns. Guerard, J.B., Jr., Markowitz, H.M., & Xu, G. (2015). Earnings forecasting in a global stock selection model and efficient portfolio construction and management. International Journal of Forecasting, 31, 550-560. 8

P u b li c M o d e l R i sk P r ef e re n c es, 19 99-20 11 Table 2: Efficient Frontier of the Global Stock Selection Model with Various Portfolio Optimization Techniques 1999 – 2011 Axioma Statistical Risk Model Earnings Model Mean Variance Lambda Annualized Standard Sharpe or Component Methodology Return Deviation Ratio Info Ratio Tracking Error GLER 0.78 0.82 0.85 0.81 0.51 13.11 12.08 12.68 12.66 8.81 Benchmark M59 1000 500 200 100 5 15.84 16.34 16.37 15.90 10.11 5.59 24.97 24.85 24.38 24.61 19.36 0.590 0.590 0.610 0.580 0.440 0.240 Source: FactSet and APT. Past performance is not indicative of future returns. Guerard, J.B., Jr., Markowitz, H.M., & Xu, G. (2015). Earnings forecasting in a global stock selection model and efficient portfolio construction and management. International Journal of Forecasting, 31, 550-560. 9

P u b li c M o d e l R i sk P r ef e re n c es, 19 99-20 11 Table 2 cont.: Efficient Frontier of the Global Stock Selection Model with Various Portfolio Optimization Techniques 1999 – 2011 Axioma Statistical Risk Model GLER TaR 1000 16.10 21.93 0.660 0.94 11.18 500 15.91 21.99 0.651 0.90 11.44 200 16.09 20.95 0.691 0.97 10.83 100 14.18 21.24 0.591 0.77 11.23 5 8.51 20.03 0.344 0.33 8.75 GLER EAWTaR2 1000 500 200 100 5 14.80 14.30 14.15 13.49 10.77 21.96 21.65 20.92 20.82 20.79 0.600 0.590 0.600 0.570 0.440 0.94 0.80 0.85 0.80 0.43 11.07 10.87 10.04 9.84 12.18 Source: FactSet and APT. Past performance is not indicative of future returns. Guerard, J.B., Jr., Markowitz, H.M., & Xu, G. (2015). Earnings forecasting in a global stock selection model and efficient portfolio construction and management. International Journal of Forecasting, 31, 550-560. 10

Table 3: Axioma Statistical Risk Model and Optimizer January 2003 – December 2016 Model: XUS GLER STAT Risk Model Tracking Error 4.00 5.00 6.00 Ann. Port Return 13.18 14.13 14.47 15.22 15.80 15.95 15.95 Ann. STD 20.16 20.56 20.66 20.99 21.20 21.63 21.63 7.00 8.00 9.00 10.00 Ann. Active Return 5.33 6.29 6.62 7.37 7.94 8.10 8.10 Ann. Active Risk 6.22 7.14 7.55 7.96 9.16 8.64 8.64 ShR 0.573 0.605 0.619 0.645 0.668 0.662 0.662 IR 0.856 0.880 0.876 0.925 0.975 0.937 0.937 Source: FactSet and Axioma. Past performance is not indicative of future returns. Guerard, J.B., Jr., & Chettiappan, S. (2017). Active quant: Applied investment analysis in emerging markets”, Journal of Investing 26, 138-152. 11

Table 3 cont.: Axioma Statistical Risk Model and Optimizer January 2003 – December 2016 Model: GL GLER STAT Risk Model Tracking Error 4.00 5.00 6.00 Ann. Port Return 12.42 14.17 14.78 15.88 16.30 16.80 17.24 Ann. STD 17.82 18.92 19.60 19.98 20.12 20.54 20.64 7.00 8.00 9.00 10.00 Ann. Active Return 4.29 6.04 6.65 7.75 8.17 8.67 9.11 Ann. Active Risk 6.04 7.88 8.00 8.57 8.69 9.14 9.41 ShR 0.601 0.659 0.667 0.710 0.726 0.775 0.753 IR 0.710 0.852 0.832 0.905 0.940 0.949 0.968 Source: FactSet and Axioma. Past performance is not indicative of future returns. Guerard, J.B., Jr., & Chettiappan, S. (2017). Active quant: Applied investment analysis in emerging markets”, Journal of Investing 26, 138-152. 12

Table 3 cont.: Axioma Statistical Risk Model and Optimizer January 2003 – December 2016 Model: EM GLER STAT Risk Model Tracking Error 4.00 5.00 6.00 Ann. Port Return 18.79 19.79 20.15 20.76 21.16 21.82 22.67 Ann. STD 26.09 26.22 26.34 26.45 26.74 26.95 27.25 7.00 8.00 9.00 10.00 Ann. Active Return 8.48 9.47 9.84 10.46 10.45 11.61 12.36 Ann. Active Risk 8.99 9.16 9.36 ShR 0.655 0.689 0.708 0.721 0.751 0.746 0.769 IR 0.944 1.033 1.062 1.095 1.085 1.128 1.180 9.55 10.09 10.22 10.40 Source: FactSet and Axioma. Past performance is not indicative of future returns. Guerard, J.B., Jr., & Chettiappan, S. (2017). Active quant: Applied investment analysis in emerging markets”, Journal of Investing 26, 138-152. 13

F i g u re 2: R e t u rn v s. R e a li ze d Tr a c k in g E rr o r Source: FactSet and Axioma. Past performance is not indicative of future returns. Guerard, J.B., Jr., & Chettiappan, S. (2017). Active quant: Applied investment analysis in emerging markets”, Journal of Investing 26, 138-152. 14

F i g u re 3: R e t u rn v s. Tra c ki n g Tra c ki n g E rr o r Source: FactSet and Axioma. Past performance is not indicative of future returns. Guerard, J.B., Jr., & Chettiappan, S. (2017). Active quant: Applied investment analysis in emerging markets”, Journal of Investing 26, 138-152. 15

Table 4: Donut Portfolio Construction for Emerging Markets Period: 2002-12-31 to 2018-07-31 (Monthly) Portfolio Return Return DONUT EM Proprietary 19.73% Model DONUT EM Proprietary 19.27% Model Group DONUT EM E' 18.56% DONUT EM E' group 18.03% Value Active IR Specific Momentum T-Stat Return T-Stat Return Exposure T-Stat 7.94% 1.37 5.40 2.08% 2.13 1.85% 0.40 5.92 7.48% 1.28 5.06 1.85% 1.86 1.82% 0.40 5.72 6.77% 1.15 6.24% 1.06 4.54 2.39% 2.24 1.04% 4.20 2.07% 1.90 1.00% 0.17 0.17 8.13 7.76 Growth Profitability Tracking Error Risk Model Return Exposure T-Stat Return Exposure T-Stat Return Exposure T-Stat 0.19% 0.19% 0.43% 0.36% 0.10 0.10 0.22 0.21 2.82 2.71 4.05 3.34 0.11% 0.11% 0.10% 0.08% -0.07 -0.08 0.00 0.01 2.76 2.69 3.42 3.05 0.51% 0.47% 0.53% 0.52% 0.18 0.16 0.20 0.19 6.22 5.80 4.57 4.65 Source: FactSet and Axioma. Past performance is not indicative of future returns. 5.81% 5.83% 5.89% 5.86% WW4AxiomaMH WW4AxiomaMH WW4AxiomaMH WW4AxiomaMH 16

R eg r e ssi o n Mo d e l D e fi n it io n s REG8 OIF99 Regression(EP,BP,CP,SP,REP,RBP,RCP,RSP) REG9 OIF99 Regression(EP,BP,CP,SP,REP,RBP,RCP,RSP,CTEF) REG10 OIF99 Regression(EP,BP,CP,SP,REP,RBP,RCP,RSP,CTEF,PM71) 17

Table 5: Portfolio Dashboard Mean-Variance Optimization AXIOMA Fundamental Risk Model 1/2002 - 11/2018 Portfolios Sharpe Ratio Info Ratio Risk Risk Specific Effect JAPAN REG8 8TE JAPAN REG8 6TE JAPAN REG8 4TE JAPAN REG9 8TE JAPAN REG9 4TE JAPAN REG9 6TE JAPAN REG10 8TE JAPAN REG10 6TE JAPAN CTEF 8TE JAPAN CTEF 6TE JAPAN CTEF 4TE JAPAN REG10 4TE 0.56 0.54 0.50 0.42 0.44 0.41 0.38 0.37 0.35 0.12 0.30 0.35 0.54 0.51 0.46 0.28 0.31 0.25 0.19 0.16 0.15 0.09 0.19 0.07 5.64 4.73 2.75 2.14 1.54 1.83 0.23 -0.13 -0.93 -0.90 -0.82 -0.97 Risk Stock Stock Effect T-Stat 4.00 3.74 2.88 1.65 1.59 1.50 0.44 0.14 -0.01 -0.18 -0.38 -0.76 Factors Effect Risk Risk Effect T-Stat Risk Total Transaction Effect Effect -0.18 -0.23 0.17 0.74 0.55 0.44 1.48 1.40 2.20 2.32 1.96 1.39 0.44 0.20 0.63 1.34 1.45 1.04 1.98 2.01 2.50 3.13 3.97 2.70 5.46 4.50 2.92 2.87 2.09 2.27 1.71 1.26 1.28 1.42 1.13 0.42 -2.24 -1.49 -0.79 -2.00 -0.82 -1.35 -1.80 -1.48 -6.73 -3.87 -1.35 -1.06 Total Effect 3.26 3.04 2.17 0.95 1.32 0.98 -0.01 -0.16 -5.40 -2.38 -0.17 -0.58 18

Table 5 cont.: Portfolio Dashboard cont. Mean-Variance Optimization AXIOMA Fundamental Risk Model 1/2002 - 11/2018 Portfolios JAPAN REG8 8TE JAPAN REG8 6TE JAPAN REG8 4TE JAPAN REG9 8TE JAPAN REG9 4TE JAPAN REG9 6TE JAPAN REG10 8TE JAPAN REG10 6TE JAPAN CTEF 8TE JAPAN CTEF 6TE JAPAN CTEF 4TE JAPAN REG10 4TE Earnings Yield -0.39 -0.34 -0.16 -0.05 0.05 -0.03 -0.02 0.03 0.56 0.56 0.53 0.08 Compounded Factor Impact Medium-Term Growth Momentum Profitability 0.28 0.25 0.18 0.22 0.13 0.19 0.19 0.19 -0.25 -0.18 -0.13 0.11 -0.75 -0.72 -0.58 -0.44 -0.33 -0.44 0.11 0.07 1.29 1.19 0.96 0.08 -1.11 -0.87 -0.54 -0.92 -0.57 -0.82 -0.83 -0.64 0.41 0.42 0.30 -0.42 Size Value Volatility 1.22 0.99 0.67 1.18 0.66 0.99 1.36 1.13 0.75 0.71 0.47 0.77 1.63 1.44 1.11 1.63 1.12 1.47 1.66 1.57 0.27 0.25 0.19 1.21 -0.54 -0.44 -0.09 -0.58 -0.12 -0.46 -0.77 -0.61 -0.70 -0.60 -0.31 -0.27 19

Table 5 cont.: Portfolio Dashboard Mean-Variance Optimization AXIOMA Fundamental Risk Model 1/2002 - 11/2018 Sharpe Ratio Info Ratio 0.69 0.58 0.71 0.58 0.75 0.66 0.73 0.72 0.61 0.67 0.58 0.66 0.30 0.13 0.27 0.15 0.44 0.19 0.39 0.40 0.13 0.19 0.09 0.14 Portfolios R1000 REG8 6TE R1000 REG8 8TE R1000 REG8 4TE R1000 REG9 8TE R1000 CTEF 4TE R1000 REG10 6TE R1000 CTEF 6TE R1000 CTEF 8TE R1000 REG9 6TE R1000 REG9 4TE R1000 REG10 8TE R1000 REG10 4TE Risk Risk Stock Stock Specific Specific Effect Effect T-Stat Risk Factors Effect Risk Factors Effect T-Stat Risk Total Effect Risk Transaction Effect Total Effect 2.52 2.36 0.81 1.25 0.63 0.75 0.47 0.29 0.54 0.10 -0.15 -0.34 -0.55 -1.40 0.44 0.07 1.53 0.41 2.23 2.89 0.31 0.73 0.62 1.01 0.16 -0.18 0.84 0.59 2.34 0.70 2.04 2.09 0.71 1.16 0.75 1.41 1.97 0.96 1.25 1.32 2.16 1.16 2.70 3.18 0.85 0.83 0.47 0.66 -0.88 -1.10 -0.43 -1.15 -0.69 -0.95 -1.00 -2.08 -1.04 -0.74 -0.86 -0.76 1.10 -0.15 0.82 0.17 1.47 0.20 1.70 1.10 -0.19 0.10 -0.39 -0.10 2.07 1.57 1.00 0.99 0.89 0.68 0.66 0.57 0.46 0.21 0.02 -0.29 20

Table 5 cont.: Portfolio Dashboard cont. Mean-Variance Optimization AXIOMA Fundamental Risk Model 1/2002 - 11/2018 Compounded Factor Impact Portfolios R1000 REG8 6TE R1000 REG8 8TE R1000 REG8 4TE R1000 REG9 8TE R1000 CTEF 4TE R1000 REG10 6TE R1000 CTEF 6TE R1000 CTEF 8TE R1000 REG9 6TE R1000 REG9 4TE R1000 REG10 8TE R1000 REG10 4TE Earnings Yield Growth 0.08 -0.03 0.31 0.55 1.18 0.75 1.62 1.72 0.57 0.57 0.84 0.71 -0.09 -0.11 -0.07 -0.15 0.01 -0.09 0.03 0.05 -0.16 -0.07 -0.08 -0.08 Medium-Term Momentum Profitability -0.28 -0.39 -0.21 -0.25 0.62 0.19 0.91 1.21 -0.15 -0.03 0.46 0.23 -0.74 -0.80 -0.64 -0.72 -0.20 -0.82 -0.00 0.08 -0.70 -0.64 -0.92 -0.67 Size Value Volatility 2.58 3.10 1.67 3.01 1.04 2.59 1.85 2.16 2.61 1.70 3.25 1.74 0.84 1.03 0.63 0.85 0.07 0.84 0.14 0.20 0.84 0.55 0.91 0.58 -1.53 -2.05 -0.50 -1.48 0.09 -0.63 -0.41 -0.74 -1.01 -0.33 -1.16 -0.14 21

Table 5 cont: Portfolio Dashboard Mean-Variance Optimization AXIOMA Fundamental Risk Model 1/2002 - 11/2018 Portfolios Sharpe Ratio Info Ratio Risk Specific Effect ALLXUS CTEF 6TE ALLXUS CTEF 8TE ALLXUS CTEF 4TE ALLXUS REG10 6TE ALLXUS REG10 4TE ALLXUS REG10 8TE ALLXUS REG8 8TE ALLXUS REG8 6TE ALLXUS REG9 8TE ALLXUS REG9 6TE ALLXUS REG8 4TE ALLXUS REG9 4TE 0.85 0.91 0.70 0.65 0.49 0.70 0.39 0.44 0.60 0.56 0.44 0.48 1.45 1.44 1.26 1.21 1.07 1.14 0.45 0.61 0.93 0.95 0.82 1.02 9.35 11.51 6.40 4.16 2.66 4.41 5.53 2.61 1.03 1.34 2.89 1.39 Risk Stock Effect T-Stat 6.89 6.60 5.77 3.53 3.09 2.98 2.93 0.59 -0.78 -0.84 -0.89 -2.08 Factors Effect Risk Effect T-Stat Total Effect 5.58 5.24 4.66 7.23 4.67 8.72 5.29 5.33 10.85 8.59 3.09 5.06 6.80 5.27 7.71 6.53 5.85 6.12 4.65 4.68 7.01 7.25 3.95 6.62 14.93 16.74 11.05 11.39 7.33 13.13 10.82 7.94 11.89 9.93 5.98 6.45 Risk Transaction Effect Total Effect -4.16 10.77 -4.98 11.76 -3.07 7.98 -4.27 7.12 -3.06 4.26 -4.88 8.26 -5.44 5.38 -4.34 3.60 -4.75 7.14 -3.92 6.01 -3.42 2.56 -2.88 3.56 22

Table 5 cont.: Portfolio Dashboard cont. Mean-Variance Optimization AXIOMA Fundamental Risk Model 1/2002 - 11/2018 Compounded Factor Impact Medium-Term Portfolios Earnings Yield Growth ALLXUS CTEF 6TE ALLXUS CTEF 8TE ALLXUS CTEF 4TE ALLXUS REG10 6TE ALLXUS REG10 4TE ALLXUS REG10 8TE ALLXUS REG8 8TE ALLXUS REG8 6TE ALLXUS REG9 8TE ALLXUS REG9 6TE ALLXUS REG8 4TE ALLXUS REG9 4TE 0.69 0.70 0.67 0.36 0.36 0.44 -0.18 0.34 0.66 0.63 0.30 0.50 -0.18 -0.26 -0.10 0.08 0.09 0.08 0.42 0.11 0.08 0.06 0.11 0.06 Momentum Profitability 3.25 4.08 2.05 2.22 1.27 2.87 0.85 0.15 0.95 0.65 -0.21 0.43 0.50 0.64 0.29 -0.59 -0.40 -0.74 -1.58 -0.77 -0.65 -0.48 -0.57 -0.38 Size Value Volatility 1.61 1.80 1.05 1.26 0.95 1.56 2.38 1.64 1.53 1.32 1.35 1.00 0.97 1.05 0.78 2.58 2.03 3.00 3.81 3.00 3.60 2.92 2.26 2.10 -1.63 -2.49 -0.64 -1.51 -0.67 -2.25 -3.82 -1.91 -2.19 -1.31 -0.92 -0.53 23

Table 5 cont.: Portfolio Dashboard Mean-Variance Optimization AXIOMA Fundamental Risk Model 1/2002 - 11/2018 Portfolios Sharpe Ratio Info Ratio Risk Specific Effect EM REG8 4TE EM REG9 4TE EM CTEF 8TE EM CTEF 4TE EM CTEF 6TE EM REG9 8TE EM REG8 6TE EM REG10 4TE EM REG9 6TE EM REG8 8TE EM REG10 6TE EM REG10 8TE 0.51 0.55 0.59 0.58 0.60 0.51 0.44 0.54 0.48 0.43 0.52 0.49 0.31 0.49 0.61 0.72 0.65 0.30 0.06 0.45 0.22 0.10 0.33 0.24 3.99 3.45 3.54 3.20 3.67 3.40 3.30 2.25 2.62 3.37 1.33 0.30 Risk Stock Effect T-Stat 2.38 2.20 2.18 2.16 2.13 1.73 1.64 1.58 1.54 1.36 1.07 0.59 Factors Effect Risk Effect T-Stat 1.79 3.28 5.76 3.84 4.67 5.09 2.32 4.06 4.37 2.59 5.63 6.34 2.11 3.60 3.64 4.42 4.02 3.31 2.17 4.24 3.49 2.27 4.17 3.68 Total Effect Risk Transaction Effect Total Effect 5.78 6.73 9.30 7.04 8.34 8.50 5.63 6.31 6.99 5.96 6.96 6.64 -2.05 -2.11 -3.58 -2.10 -2.75 -3.62 -2.79 -1.92 -2.80 -3.52 -2.96 -3.54 3.73 4.63 5.72 4.94 5.59 4.88 2.83 4.39 4.19 2.44 4.00 3.10 24

Table 5 cont.: Portfolio Dashboard cont. Mean-Variance Optimization AXIOMA Fundamental Risk Model 1/2002 - 11/2018 Compounded Factor Impact Medium-Term Portfolios EM REG8 4TE EM REG9 4TE EM CTEF 8TE EM CTEF 4TE EM CTEF 6TE EM REG9 8TE EM REG8 6TE EM REG10 4TE EM REG9 6TE EM REG8 8TE EM REG10 6TE EM REG10 8TE Earnings Yield Growth 0.25 0.43 0.87 0.63 0.80 0.38 0.13 0.44 0.41 0.00 0.41 0.39 0.26 0.16 -0.02 -0.09 -0.06 0.21 0.32 0.17 0.18 0.41 0.23 0.24 Momentum Profitability -0.85 -0.19 2.69 1.51 2.13 0.25 -0.99 0.53 -0.09 -0.78 0.93 1.32 -0.52 -0.43 0.56 0.29 0.36 -0.74 -0.75 -0.35 -0.59 -0.92 -0.48 -0.53 Size Value Volatility 0.61 0.49 0.62 0.30 0.49 1.04 1.00 0.43 0.82 1.20 0.73 0.87 1.61 1.69 0.93 0.47 0.73 3.21 2.46 1.68 2.57 2.84 2.60 3.16 0.18 0.27 -1.37 -0.06 -0.70 -0.62 -0.37 0.21 -0.23 -0.74 -0.30 -0.61 25

W h a t d o w e b e l ie v e ? Diversified Portfolios can Offer Positive Active Returns; Financial Anomalies, known in 1988, have Existed and Persisted; Portfolio Construction Requires Statistically Significant Tilt; Portfolio Constraints are Useful with several Anomalies; The Vast Source of Active Management is Derived from Forecasted Earnings Acceleration in Stock Selection; Stronger in non-U.S. and EM universes than in U.S. universes; Price Momentum Risk Premium is MUCH Larger in non-U.S. and EM universes than in U.S. universes! 26

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