Any frequent reader of our blog knows we are fans of momentum investing. At this point, investment professionals should know that momentum historically works, that momentum [...]
I will be talking on the Factor Investing panel at the upcoming Evidence-Based Investing Conference in Dana Point, CA next Sunday –Tuesday. I am excited [...]
The Holy Grail for mutual fund investors is the ability to identify in advance, which of the active mutual funds (or ETFs nowadays) will outperform [...]
Our Global Value Momentum Trend Index ("GVMT" or "GVMT Index") is a globally diversified equity strategy that leverages trend-following to manage tail-risks. The strategy can [...]
Title: FACTOR BASED INVESTING: THE LONG TERM EVIDENCE Authors: ELROY DIMSON, PAUL MARSH, AND MIKE STAUNTON Publication: THE JOURNAL OF PORTFOLIO MANAGEMENT, [...]
One of the great debates in finance is whether the source of the value premium is risk-based or a behavioral anomaly. In our book, “Your [...]
The Oracle of Omaha just commented on the Chinese stock market in this year's Berkshire's annual meeting: ...Markets have a casino characteristic that has a [...]
There are a number of recent studies that propose a more rigorous criteria for evaluating the practical significance of factors published in academic research journals. [...]
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 [...]
ETFs and factor investing are on the tip of everyone's tongue these days. Factor investing is being couched as a "new" thing, despite the fact that institutional investors have been deploying these strategies for years. (See this working paper discussing the effective use of smart beta strategies by institutional investors.) However, because factor investing is now directly accessible via ETFs, those who are unfamiliar with factor investing are asking questions about how these "new" funds will affect the market. Two burning questions many investors have: What is the overall capacity of smart beta funds? What is the capacity of momentum-based funds, specifically?
Tomorrow I'll be sitting with Pat O'Shaughnessy and Ben Johnson to discuss "Straight Talk About Smart Beta." Here is a link to the big Morningstar [...]
A paper, "Facts about Formulaic Value Investing," is making the rounds and professes to plunge a dagger directly into the heart of systematic value investors. Half [...]
Value and Momentum investing have been studied across many different markets and asset classes (Asness et al 2013) and have shown to be effective factors. [...]
David Smith, Na Wang, Ying Wang and Edward Zychowicz contribute to the literature on momentum with their paper, “Sentiment and the Effectiveness of Technical Analysis: Evidence from the Hedge Fund Industry,” which was published in the December 2016 issue of the Journal of Financial and Quantitative Analysis. Their work examines how investor sentiment affects the effectiveness of technical analysis strategies (which include the use of moving averages as well as momentum) used by hedge funds (which are considered sophisticated investors). The study was motivated by prior research that has focused on “investor sentiment,” which is the propensity of individuals to trade on noise and emotions rather than facts. Sentiment causes investors to have beliefs about future cash flows and investment risks that aren’t justified. Two researchers, Malcolm Baker and Jeffrey Wurgler, constructed an investor sentiment index based on six measures: trading volume as measured by NYSE turnover; the dividend premium (the difference between the average market-to-book ratio of dividend-payers and non-payers); the closed-end fund discount; the number and first-day returns of IPOs; and the equity share in new issues. Data is available at through Wurgler and New York University.
We've talked extensively about the concepts of active share and active fee, which aren't flawless metrics, but they have elevated the discussion around identifying and [...]
A few years ago, the profitability "quality" factor was originally proposed by Robert Novy-Marx. Here is a snippet from the abstract of the paper: Profitability, [...]
Each year I teach my "seminar in investments" course at Drexel, which consists of the Masters in Finance students and a handful of geeky MBA [...]
Jack did a nice recap on a momentum paper last week that looks at using fundamentals (revenue volatility, low cost of goods, and B/M) to help identify the best price momentum stocks. This paper sounds similar to the paper Jack reviewed, but there is a key difference: the researchers are looking at the momentum of the fundamentals, not the absolute value of the fundamentals. The authors compile a fundamental momentum variable by calculating the moving averages of 7 elements: return on equity return on assets earnings per share accrual-based operating profitability cash-based operating profitability gross profitability net payout ratio
When it comes to momentum investing, everyone is always looking for a better way to implement a momentum-based stock selection strategy (the same goes for a [...]
Johnny Paycheck has a great country song centered around the following lyric: Take this job and shove it...I ain't working here no more... Campbell Harvey, [...]
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