Timing Country Exposure with Value: A Valuation Measure Horserace
Buy cheap. This is a motto many live by, not only in their daily lives but also in their investment philosophy. Historically, "buying cheap" stocks [...]
Momentum Everywhere, Including in Factors
Momentum is the tendency for assets that have performed well (poorly) in the recent past to continue to perform well (poorly) in the future, at [...]
Do Relative-Value Strategies Beat Traditional Systematic Value Investing Strategies?
Readers often send us great questions related to different ideas on systematic value strategies. The outcome of years of back and forth with readers and [...]
Are Factors Better and More Diversifying Than Asset Classes?
Executive Summary Factor investing promises outperformance at low cost. But to add value in a portfolio, it must deliver positive risk-adjusted returns and with low [...]
Explaining the Value Effect in Emerging Markets
Explaining the Value Effect in Emerging Markets: Tangible vs Intangible Information Douglas W. Blackburn and Nusret Cakici A version of this paper can be found here. [...]
Time Series Momentum (aka Trend-Following): A Good Time for a Refresh
Similar to some better-known factors like size and value, time-series momentum is a factor which has historically demonstrated above-average excess returns. Time-series momentum, also called [...]
Value and Momentum Factor Portfolio Construction: Combine, Intersect, or Sequence?
Wes asked that I contribute to the ongoing debates regarding the construction of value and momentum portfolios. There are three key research pieces on [...]
The Mother of All Momentum Research Reports. A Must Read!
J.P. Morgan researchers, Marko Kolanovic and Zhen Wei, produced an incredibly detailed report on all aspects of momentum (one of our favorite topics!) Here is [...]
The Value Effect and Macroeconomic Risk
It has been well-documented that value stocks have provided higher expected returns than growth stocks. However, there is a great debate about the source of [...]
Predicting Stock Returns Using Firm Characteristics
A few weeks ago, we did a deep dive into the factors versus characteristics debate. One of the reasons we've brought up this debate is [...]
The Returns to Value Strategies When Valuation Spreads Are Wide (Deep Value)
The academic research has generally found valuations, such as the earnings yield (E/P) (or the CAPE 10 earnings yield) and valuation spreads, have predictive value [...]
Momentum and Market Anomalies
Momentum is the tendency for assets that have performed well (poorly) in the recent past to continue to perform well (poorly) in the future, at [...]
Historical Finance Fight: Ben Graham versus H.M. Gartley
Reading really old research is humbling. https://archive.org/ is an awesome place to start. One quickly recognizes that market participants were very savvy way back in the [...]
Everyone, Even a Passive Vanguard Investor, is a Factor Investor
Much has been made of Factor Investing, and even Vanguard is launching a suite of actively-managed factor ETFs. But even now, with Vanguard offering factor [...]
Do factor portfolios survive transaction costs?
Factor investing, and the associated intellectual battles, have raged for decades in academic finance journals. However, now that factor investing has gone mainstream via ETFs, [...]
Monetary Momentum
On most mainstream finance websites, a good chunk of the stories discuss the FED and where interest rates are going. Intuitively, this makes sense: The [...]
Factor Investors Beware: Positive SMB May Not Mean You Own Small-Caps
Regression analysis is used all the time to assess how a portfolio "loads" on certain factors. The most common factor loadings examined are the market, [...]
Do Portfolio Factors or Characteristics Drive Expected Returns?
This article examines a somewhat overlooked, but important, discussion that raged among academic researchers on the source of the value investing premium in the late 1990s and early 2000s—the topic: factors vs characteristics.
Factor Investing with Factor Expert Lu Zhang
Replicating Anomalies is arguably a "must-read" for anyone who thinks about factor investing and is looking to improve their understanding of the space. Lu Zhang, [...]
Takeaways from a Non-PHD who Powered Through a 144-page Factor Investing Paper
Wes recently challenged me with a unique proposition: Hey Ryan, read through this Replicating Anomalies paper and tell me what you think. Its a bit [...]