David Dreman on Value Investing and Investor Overreaction
David Dreman is a personal hero of mine. Years ago, I stumbled on his book, “Psychology and the Stock Market: Investment Strategy Beyond Random Walk,” [...]
How Portfolio Construction Affects Momentum Funds
We have already documented the returns to generic momentum investing strategies. Within the fund marketplace, many investors focus on fees and less on process. For example, Morningstar highlights the fees [...]
A classic value investor–Carl Icahn
Carl's secret to "real money:" You gotta buy 'em when nobody wants them...when everyone hates 'em you buy 'em. When everyone wants 'em you sell [...]
DIY Asset Allocation Weights: November 2015
Do-It-Yourself tactical asset allocation weights are posted. Create a free account here if you want to access the site directly. Sign in here if you already have a [...]
An interesting look at the size anomaly
Many of you are probably aware of the paper from AQR entitled, "Size Matters: If you control for your junk." We loved the title so [...]
Why I Don’t Invest in Momentum Stocks…Yet!
Confirmation bias is the tendency to cling to research/ideas that confirm with what you already believe. This behavioral bias leads to overconfidence and can impede our search for [...]
Ben Graham Would be Proud: Fundamental Analysis Works
Here is an interesting working paper on the use of fundamental analysis in stock selection. The authors take a dynamic regression "machine learning-esque" approach to building [...]
Cliff Asness Quick Hits: Smart Beta and Risk Parity
Cliff Asness gave a talk at The Bloomberg Markets Most Influential Summit a few weeks ago, and offered up some discussion of recent market developments, [...]
Absolute Strength Momentum Investing Strategy
Here we highlight an interesting working paper titled "Absolute Strength: Exploring Momentum in Stock Returns" by Gulen and Petkova (2015). The abstract is the following: [...]
Value Investing: The Pain Train has Arrived and it Sucks.
A few months ago we highlighted a surprising result: cheap high-quality stocks were getting crushed by expensive junk stocks. The spread at the end of [...]
Daily Academic Alpha: Momentum Investing and Asset Allocation
The results in this paper won't surprise most who are regular readers, but the paper below does a nice job explaining things in a simple [...]
How Do Dividend Paying Stocks Affect the Value Investing Anomaly?
Meb Faber tweeted an interesting question related to taxes, dividend payers, and the value premium the other day. I'll summarize the heart of the question: How do dividend [...]
Combining volatility, momentum, and trend in asset allocation
The Effective Combination of Risk-Based Strategies with Momentum and Trend Following Gregory Guilmin A version of the paper can be found here. Want a summary of [...]
Buffett On Economic Moats
In 2007, Warren Buffett gave an extended talk to a group of MBA students at the University of Florida. During it, Buffett spends some time talking [...]
Warren Buffett On LTCM, Blind Spots, Leverage, and Unnecessary Risk
In 2007, Warren Buffett gave an extended talk to a group of MBA students at the University of Florida. Below are some highlights: Question: You [...]
Combining Value and Momentum in Stock Selection and Market Timing
Recently, we wrote two posts about how to combine Value and Momentum for stock selection purposes (Part 1 and Part 2). We followed this piece with a post [...]
Avoiding the Big Drawdown with Trend-Following Investment Strategies
Simple timing rules, focused on absolute and trending asset class performance, seem to be useful in a downside protection context. Our analysis of the downside protection model (DPM), applied on various market indices, indicates there is a possibility of lowering maximum drawdown risk, while also offering a chance to participate in the upside associated with a given asset class. Important to note, applying the DPM to a portfolio will not eliminate volatility and the portfolio will deviate (perhaps wildly) from standard benchmarks. For many investors, these are risky propositions and should be considered when using a DPM construct.
Private Equity Replication with Leveraged Small-Cap Value Stocks
Of the major asset classes, private equity has recently had the best absolute returns. According to Cambridge Associates, the 25-year return on private equity was [...]
Expensive Junk Stocks are Killing High-Quality Value Stocks, YTD
In general, investors focused on affordable stocks with strong fundamentals have been taken to the cleaners year-to-date. Meanwhile, expensive stocks with poor fundamentals have been [...]
A Live Lesson in Value-Investing: The Energy Meltdown
We sat down and did a quick and dirty analysis of the S&P sector ETFs on a YTD basis and over the past 2 months. [...]