Because AI systems can produce hundreds of seemingly coherent theoretical explanations for mined empirical results, investors need to establish high hurdles before allocating to anomaly-based strategies.
This paper investigates how modeling choices impact MLM outcomes such as cross-sectional return predictability.
Given the similar net returns that UMM and LMM loans have delivered, allocators should consider diversifying across borrower size cohorts. Since LLM loans are somewhat riskier, careful due diligence should be performed in terms of a lender’s credit loss history, fees/expenses, and use of leverage.
The following factor performance modules have been updated on our Index website.[ref]free access for financial professionals[/ref] Factor Performance Factor Premiums Factor Data Downloads
Advisors and managers will have to adopt a more nuanced view of risk as recognition of the frequency of equity underperformance becomes widespread.
Simple, easy-to-implement, systematic formula-based investing can still generate market outperformance, providing investors with efficient exposure to well-documented factor premiums.
Do-It-Yourself trend-following asset allocation weights for the Robust Asset Allocation Index are posted here. (Note: free registration required) Request a free account here if you [...]
One critical, yet often overlooked, choice is how stocks are weighted in the objective function during training, with equally weighted (EW) approaches being the norm. This paper investigates how such choices impact cross-sectional return predictability and the performance of trading strategies derived from these predictions, focusing on the interplay between objective function design and model outcomes.
A critical task in stock selection is identifying a firm’s true profitability. Given the potential of AI to deal with large data, an important question is: Can AI outsmart seasoned analysts?
Managers are more likely to vote for analysts who exhibit greater “say-buy/whisper-sell” behavior toward these man agers. This suggests that analysts reduce the accuracy of their public recommendations, thereby maintaining the value of their private advice to funds.
Systematic factor-driven value strategies have underperformed broad market indices (such as the S&P 500) over the past 15+ years. That has led many to question [...]
This study addresses a critical gap in financial forecasting by improving the accuracy of long-term expected return (E(R)) predictions. By evaluating various frameworks and proxies out-of-sample, free from biases like look-ahead bias, it provides more reliable methods for investors to make informed decisions about asset allocations.
Cliffwater found that private equity allocations by state pensions produced a 11.0% net-of-fee annualized return over the 23-year period ending June 30, 2023. Over the same period the CRSP 1-10 Index (U.S. total market) returned 7.2% and the MSCI All Country World ex USA Index returned 4.4%.
Underreaction to continuous news plays a key role in generating momentum internationally.
The following factor performance modules have been updated on our Index website.
Allocation to trend following can further improve the efficiency of their portfolio by also adding allocations to the other uncorrelated strategies, further reducing tail risks by reducing the dispersion of potential outcomes.
Do-It-Yourself trend-following asset allocation weights for the Robust Asset Allocation Index are posted here. (Note: free registration required) Request a free account here if you [...]
This paper examines the time-varying roles of subjective expectations in driving stock price and return variations.
An anomaly is a pattern in stock returns that deviates from what is expected based on established financial theories or models. These patterns can sometimes [...]
The propagation of factors actually reflect valid characteristics of the markets and market fluctuations.
© Copyright 2023 alpha architect | All Rights Reserved | Home | Terms of Use | Privacy Policy | Disclosures | Subscribe | Contact Us
