Wesley R. Gray, Ph.D.

//Wesley R. Gray, Ph.D.

About Wesley R. Gray, Ph.D.

After serving as a Captain in the United States Marine Corps, Dr. Gray earned a PhD, and worked as a finance professor at Drexel University. Dr. Gray’s interest in bridging the research gap between academia and industry led him to found Alpha Architect, an asset management that delivers affordable active exposures for tax-sensitive investors. Dr. Gray has published four books and a number of academic articles. Wes is a regular contributor to multiple industry outlets, to include the following: Wall Street Journal, Forbes, ETF.com, and the CFA Institute. Dr. Gray earned an MBA and a PhD in finance from the University of Chicago and graduated magna cum laude with a BS from The Wharton School of the University of Pennsylvania.

Using Utilities to Time the Market

By | 2017-08-18T16:53:56+00:00 August 11th, 2014|Research Insights, Tactical Asset Allocation Research|

Strategy Background Beta Rotation strategy (BRS) is discussed by Charles Bilello and Michael Gayed in their new paper, “An International Approach to Beta Rotation: The Strategy, Signal, and Power of Utilities” The paper shows significant [...]

Mythbuster: Are women more talkative than men?

By | 2017-08-18T16:59:58+00:00 July 31st, 2014|Research Insights|

Using sociometers to quantify social interaction patterns Note: this is not related to finance, but a fun study we found while perusing economic and behavioral psychology journals. Onnela, Waber, Pentland, and Lazer. A version of [...]

Momentum Investing: Ride Winners and Cut Losers. Period.

By | 2017-08-18T17:00:14+00:00 July 16th, 2014|Research Insights, Key Research, Momentum Investing Research|

Momentum has historically been a great strategy. Although counter-intuitive to many value investors, buying stocks with rising prices has been a great investment approach--arguably better than value investing. Moreover, the approach is robust between the 2 samples analyzed. The lesson is clear: Let your winners ride and cut your losers short.

Timing the Market with Mean Reversion Indicators

By | 2017-08-18T16:54:56+00:00 July 15th, 2014|Research Insights, Momentum Investing Research, Tactical Asset Allocation Research|

Mean Reversion, Momentum and Return Predictability Huang, Jiang, Tu, Zhou A version of the paper can be found here. Want a summary of academic papers with alpha? Check out our Academic Research Recap Category! Abstract: We document [...]

How to Build Expected Return Forecasting Models

By | 2017-08-18T17:03:28+00:00 July 14th, 2014|Research Insights, Key Research, Tactical Asset Allocation Research, Macroeconomics Research|

Investors are enamored with various investment houses and personalities who claim insight into the prospects for long-term expected market returns. Some classic examples include Nouriel Roubini, John Hussman, David Rosenberg, or Jeremy Grantham. All really smart people. But have you ever asked "How" these folks came to their conclusions? In most cases, the answer is probably "No" and the reason is because there is a lack of transparency from the author(s) and/or a lack of knowledge/understanding on behalf of the reader. We also want to highlight that one can develop incredibly complex return forecasting models -- super sexy, super interesting, super compelling, etc. -- but that still doesn't mean they are any good at forecasting much of anything.

Walmart delivers Low Prices…and High Home Prices

By | 2017-08-18T16:52:52+00:00 July 14th, 2014|Research Insights, Macroeconomics Research|

When Walmart Comes to Town: Always Low Housing Prices? Always? Devin Pope and Jaren Pope A version of the paper can be found here. Want a summary of academic papers with alpha? Check out our Academic Research [...]

Using Div Yield to Predict Returns: A lesson in Predictive Regressions

By | 2017-08-18T16:53:58+00:00 July 11th, 2014|Research Insights|

Filip Lacerda and Pedro Santa-Clara have an interesting paper that investigates the use of dividend growth to predict future returns. Here is the abstract: The dividend-price ratio changes over time due to variation in expected [...]

Does the size effect exist? Probably.

By | 2017-08-18T17:06:07+00:00 July 2nd, 2014|Research Insights, Key Research, Value Investing Research|

The traditional small-minus-big value-adjusted long/short factor (SMB) developed by Gene Fama and Ken French has arguably added NO value over time. Performance over the past 30 years has been flat and highly volatile (1983-2013). The results [...]

Value Investing: Never Buy Expensive Stocks. Period.

By | 2017-08-18T16:53:45+00:00 July 1st, 2014|Research Insights, Key Research, Value Investing Research|

We did a recent internal simulation study on the performance of cheap and expensive stocks based on a variety of valuation metrics. We looked at all our favorites from our Journal of Portfolio Management paper, [...]

Recent Resarch on Predicting Bubbles

By | 2017-08-18T16:58:02+00:00 June 27th, 2014|Research Insights, Macroeconomics Research|

  Fulcrum Asset Management has an interesting overview piece related to some recent research that attempts to predict bubbles: http://www.fulcrumasset.com/files/frn201401.pdf The source article is below: http://cowles.econ.yale.edu/P/cd/d19a/d1914.pdf Absract: Recent work on econometric detection mechanisms has shown [...]

Own the Stock and Sell Calls: Guaranteed Win, Right?

By | 2017-08-18T16:59:31+00:00 June 24th, 2014|Research Insights|

Covered Calls and Their Unintended Reversal Bet Israelov and Nielsen A version of the paper can be found here. Want a summary of academic papers with alpha? Check out our Academic Research Recap Category! Abstract: Equity index [...]

Monthly Stock Returns: One Fat Tail and a Dash of Skewness?

By | 2017-08-18T17:00:10+00:00 June 23rd, 2014|Uncategorized|

Been thinking a lot about risk and return these days. Even started skimming through Fama's old book "Foundations of Finance." The book is available for free: http://faculty.chicagobooth.edu/eugene.fama/research/ Fama has some interesting charts and ideas regarding the [...]

Predicting Mental Defects: Does the Model or the Expert Win?

By | 2017-08-18T16:59:11+00:00 June 14th, 2014|Behavioral Finance|

Clinical intuition and test scores as a basis for diagnosis Klehr, R. Journal of Consulting Psychology, 13, 34-38 An online version of the paper can be found here Want a summary of academic papers with [...]

Can Market Valuations Be Effective Market-Timing Signals?

By | 2017-08-18T17:08:24+00:00 June 12th, 2014|Research Insights, Key Research, Value Investing Research, Tactical Asset Allocation Research|

We know that valuation metrics such as the CAPE, or Shiller P/E, ratio are correlated with long-term returns (notice we didn't say "predict" long-term returns--that is debatable). Here is a brief background on the measure: http://www.alphaarchitect.com/blog/2011/10/06/the-shiller-pe-ratio/ [...]