Empiritrage has a detailed research piece on the question of whether or not quantitative value can beat fundamental stock-pickers. http://empiritrage.com/2012/03/24/man-vs-machine-quantitative-value-or-fundamental-value/ Here are a few highlights: First, some summary statistics.
MF_EW_Top10% represents a portfolio of Magic Formula stocks with market caps greater than $500mm. VIC_EW_500mm represent a calendar-time portfolio of recommendations posted to Valueinvestorsclub.com.
From the looks of it, Man beats Machine…but…
Stock-pickers eat some serious drawdowns. Also, over 5-years you can still be out 25% with the stock-pickers relative to -12% with the Machine. Anyway, interesting piece regarding the philosophical battle between process and private information. Here is an old video I created to mock both value investors and quant investors:
- The views and opinions expressed herein are those of the author and do not necessarily reflect the views of Alpha Architect, its affiliates or its employees. Our full disclosures are available here. Definitions of common statistics used in our analysis are available here (towards the bottom).
- Join thousands of other readers and subscribe to our blog.
- This site provides NO information on our value ETFs or our momentum ETFs. Please refer to this site.