Factor Investing

Trend Following and Momentum Turning Points

By |September 11th, 2023|Research Insights, Factor Investing, Trend Following, Basilico and Johnsen, Academic Research Insight, Momentum Investing Research|

Trend follower nerd alert: This study is important because it offers a comprehensive analysis of TS momentum strategies, its unifying framework that links performance to underlying variables, and its practical implications for investors seeking to enhance their understanding of momentum investing and improve their portfolio performance.

Do Short-Term Factor Strategies Survive Transaction Costs?

By |September 5th, 2023|Transaction Costs, Factor Investing, Research Insights, Basilico and Johnsen, Academic Research Insight, Behavioral Finance, Momentum Investing Research|

Short term return anomalies are generally dismissed in the academic literature "because they seemingly do not survive after accounting for market frictions.” In this research, short term “factors” are taken seriously and the authors argue the standard parameters may not apply for short horizons.

Investor demand, rating reform and equity returns

By |August 7th, 2023|Price Pressure Factor, Research Insights, Factor Investing, Basilico and Johnsen, Academic Research Insight, Momentum Investing Research, Active and Passive Investing|

The traditional financial theory attributes security returns to market- or factor-based risk, with no role ascribed to other influences. In this research, the authors argue for including investor demand as an additional variable in explaining returns.  Can changes in investor demand generate systematic changes in security returns?

The Quality Factor and the Low-Beta Anomaly

By |August 4th, 2023|Research Insights, Factor Investing, Larry Swedroe, Low Volatility Investing|

The empirical evidence demonstrates that returns to the low-beta anomaly are well explained by exposure to other common factors, and it has only justified investment when low-beta stocks were in the value regime, after periods of strong market and small-cap stock performance, and when they excluded high-beta stocks that had low short interest.

Conditioning anomalies using retail attention metrics

By |July 28th, 2023|Relative Sentiment, Factor Investing, Research Insights, Guest Posts|

By using a novel measure of investor attention, generated from InvestingChannel’s clickstream data on online financial news consumption, we can identify broad groups of stocks which are less efficiently priced and therefore where anomalies such as Value and Momentum are likely to produce greater cross sectional differentiation in returns.  We also apply these groupings to proprietary ExtractAlpha stock selection signals.

Regression is a tool that can turn you into a fool

By |July 27th, 2023|Empirical Methods, Research Insights, Factor Investing, Value Investing Research|

Running regressions on past returns is a great tool for academic researchers who understand this approach's nuance, assumptions, pitfalls, and limitations. However, when factor regressions become part of a sales effort and/or are put in the hands of investors/advisors/DIYers, "the tool can quickly turn you into a fool."

Reducing the Risk of Momentum Crashes

By |July 21st, 2023|Research Insights, Factor Investing, Larry Swedroe, Momentum Investing Research|

The empirical research demonstrates that, on average, investing in previous winners and short selling previous losers offers highly significant returns that other common risk factors cannot explain. However, momentum also displays huge tail risk, as there are short but persistent periods of highly negative returns. Crashes occur particularly in reversals from bear markets when the momentum portfolio displays a negative market beta and momentum volatility is high.

And the Winner Is: Examining Alternative Value Metrics

By |July 7th, 2023|Research Insights, Factor Investing, Larry Swedroe, Value Investing Research|

Although the most efficient way to implement a value strategy may need to be clarified, it is clear that value has withstood the test of time and that some implementations are superior to others. The evidence suggests that P/B is not an efficient metric as a standalone criteria. Instead, value strategies that use P/B should include at least a measure of profitability while managing sector - and security-level diversification.

Go to Top