Now that the Federal Reserve has begun the process of raising interest rates, and has announced their intention to begin to unwind their policy of quantitative easing (reducing the amount of bonds in their portfolio, [...]
Title: GENDER AND CONNECTIONS AMONG WALL STREET ANALYSTS Authors: LILY FANG AND STERLING HUANG Publication: THE REVIEW OF FINANCIAL STUDIES, V.30, SEPTEMBER 2017 (version here) What are the research questions? By studying a sample of Wall Street analysts [...]
The passive investing revolution is truly upon us. Ever since 1975, when Jack Bogle introduced the first index mutual fund, passive indexing has marched on relentlessly. Jack Bogle is everywhere. He was on TV this [...]
As we have mentioned before, here, here and here, there is overwhelming evidence that the number of stock anomalies in the universe is much lower than originally thought. Most of the previous research papers attempt to [...]
Prof. Richard Price, an old friend, co-author, and Alpha Architect advisory board member, is working on some cool new co-authored research that requires audience participation! Dr. Price, alongside Professors Dipankar Ghosh, and Atul Rai, are [...]
Title: WHAT DIFFERENCE DO DIVIDENDS MAKE? Authors: C. Mitchell Conover, CFA, CIPM, Gerald R. Jensen, CFA and Marc W. Simpson, CFA Publication: Financial Analysts Journal, Volume 72, Number 6, 2016 (version here) What are the [...]
Many in the financial service industry are now using ETFs to build portfolios. Some love the tax-efficiency of ETFs relative to mutual funds, while others use ETFs as trading vehicles. Either way, ETF assets continue to [...]
Title: RETAIL FINANCIAL ADVICE: DOES ONE SIZE FITS ALL? Authors: FOERSTER S., LINNAINMAA J.T., MELZER B.T., PREVITERO A. Publication: JOURNAL OF FINANCE, V.72, AUGUST 2017 (version here ) What are the research questions? By studying a unique data set [...]
The Standard and Poor's (S&P) 500 index is a value-weighted stock index based on the market capitalizations of 500 large companies in the US. This index was introduced in 1957 and intended to be a [...]
In their seminal 1993 paper, “Returns to Buying Winners and Selling Losers: Implications for Stock Market Efficiency,” Narasimhan Jegadeesh and Sheridan Titman reported significant returns to buying winners and selling losers in the U.S. equity [...]
Title: OVERREACTION AND THE CROSS-SECTION OF RETURNS: INTERNATIONAL EVIDENCE Authors: Douglas W. Blackburn, Nusret Cakici Publication: Journal of Empirical Finance 42 (2017) 1-14 https://ssrn.com/abstract=2800188 What are the research questions? Is there a consistent and reliable [...]
A common question asked in the factor investing field is the following -- "how much of the model's performance is driven by sector allocations, and how much is driven by security selection?" Our answer is to simply buy Value stocks or Momentum stocks, regardless of sector constraints. Why? Well a nice anecdote (but not data) is that investing in "cheap" technology stocks was not a great idea in the internet bubble crash.
Title: ABUSING ETFs Authors: UTPAL BHATTACHARYA, BENJAMIN LOOS, STEFFEN MEYER, ANDREAS HACKETAL Publication: REVIEW OF FINANCE, VOL.21, 2017 (version here) What are the research questions? By studying the trading data (provided by a German brokerage [...]
Title: Factor Investing in the Bond Market Authors: Patrick Houweling and Jeroen van Zundert Publication: Financial Analysts Journal, Vol. 3 No. 2, 2017 (https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2516322) What are the research questions? Can the concepts contained in equity [...]
In our context, a technical trading indicator can be considered as a combination of a specific technical trading rule with a particular moving average of prices. In two preceding blog posts we showed that there [...]
Similar to some better-known factors like size and value, time-series momentum is a factor that historically has demonstrated above average excess returns. Time-series momentum, also called trend-momentum or absolute momentum, is measured by a portfolio long assets that have had recent positive returns and short assets that have had recent negative returns. Compare this to the traditional (cross-sectional) momentum factor that considers recent asset performance only relative to other assets. The academic evidence suggests that inclusion of a strategy targeting time-series momentum in a portfolio improves the portfolio’s risk-adjusted returns.
The folks at AQR are top-notch researchers and have written a ton of great papers. Some of their more famous papers are the following: Value and Momentum Everywhere A Century of Evidence on Trend Following [...]
Title: MITIGATING ESTIMATION RISK IN ASSET ALLOCATION: DIAGONAL MODELS VERSUS 1/N DIVERSIFICATION Authors: CHRIS STIVERS, LICHENG SUN Publication: THE FINANCIAL REVIEW, 2016 (version here) What are the research questions? In spite of several efforts by researchers [...]
Title: INEFFICIENCIES IN THE PRICING OF EXCHANGE TRADED FUNDS Authors: ANTTI PETAJISTO Publication: FINANCIAL ANALYST JOURNAL, I Q 2017 (version here) What are the research questions? The article provides new empirical evidence on the state of market efficiencies in [...]
If you ask your typical long-only investor (or financial advisor) how momentum is doing this year they'll likely say, "Amazing!" This statement will almost surely be based on the fact they own (or know about) the [...]
