Robert Arnott, Denis Chaves, and Tzee-man Chow were named winners of the top prize in the Bernstein Fabozzi/Jacobs Levy Awards.
Mr. Arnott, chairman and CEO of Research Affiliates; Mr. Chaves, portfolio manager in the quantitative equity group at Vanguard Group; and Mr. Chow, a senior vice president at Research Affiliates, were honored for their article "King of the Mountain: The Shiller P/E and Macroeconomic Conditions."
The article, which appeared in the fall 2017 issue of The Journal of Portfolio Management, discussed the limitations of predicting equity returns over the short term using the cyclically adjusted price/earnings ratio, also knows as the "CAPE ratio" or the "Shiller P/E ratio." The authors presented "a model that includes inflation and the level of real bond yields as variables that influence the forecasted level of short-term equity returns," according to a statement from Jacobs Levy Equity Management, which funds the awards.
"The findings by Arnott, Chaves and Chow, that moderate levels of inflation and real interest rates coincide with the highest average valuation multiples, are an important contribution to the literature. They will cause many investment experts to reconsider the widespread assumption that stocks fare best when inflation and interest rates are at rock bottom," said Bruce Jacobs, principal and co-founder of Jacobs Levy Equity Management, in the statement.
The winners were selected by subscribers who voted for the best papers published in the journal and its special quantitative strategies and real estate issues in 2017.
In addition to the $2,500 Best Article award, three other articles were recognized as Outstanding Articles.
The awards, in their 19th year, are named for Peter L. Bernstein, who founded the journal; Frank J. Fabozzi, editor; and Jacobs Levy Equity Management.
The papers are available on the Journal of Portfolio Management's website. Subscription is required.