Value Investing: Digging Manager Graveyards Since 1963.
Following value strategies can be hazardous to one's wealth in the short run. Oil stocks are a great example of the challenge value investors face: The stocks [...]
Oil Stocks: A Real-Time Case Study in Value Investing
I just took a snapshot of the front page of Yahoo Finance, CNBC.com, and Bloomberg.com: Bloomberg.com @ 1725 EST CNBC.com @ 1725 [...]
The Robust Asset Allocation (RAA) Index
Robust asset allocation solutions should be relatively simple, minimize complexity, and be robust across different market regimes. Simultaneous to these requirements, the solution must be affordable, liquid, simple, tax-efficient, and transparent, otherwise, many of the benefits of the solution will flow to the croupiers and Uncle Sam. We recommend that investors explore our robust asset allocation framework and go for the do-it-yourself solution. You'll be paying yourself 1%+ a year via saved RIA fees. Is this the only solution? No. But any solution must be robust, simple, tax-manageable, and low-cost. This is our best effort to develop a simple model. Developing a complicated model is easy; simple is difficult.
Quant Value $19.99 Book Deal is Over
Wow. We blew out 300+ books in a few weeks. There are a lot more quant geeks out there than I originally suspected. Holy mackerel! [...]
Chatting Quant Value @ Wharton Today–Business Radio
http://businessradio.wharton.upenn.edu/programs/behind-the-markets-with-jeremy-siegel/ I'll be chatting with the "Jeremys" on Sirius Radio on Business Radio Channel 111. @ 1pm EST Hosts Jeremy Siegel Professor Jeremy Siegel is [...]
Mission Impossible: Beating the Market Forever
A quick glance at the most recent Berkshire Hathaway annual report (PDF) highlights an amazing data point: Warren Buffett has compounded at 19.7% a year from 1965 through 2013; the S&P 500 Total Return Index has compounded at 9.8% a year from 1965 through 2013. The immediate reaction to these figures is predictable: “Warren Buffett is an investing god, so we should buy Berkshire Hathaway and throw away the keys.” The gut reaction is that Buffett can continue to beat the market forever. Unfortunately, as this post highlights, this is an impossible feat.
Quantitative Value Research: NCAV/MV Factor
Testing Benjamin Graham's Net Current Asset Value Strategy in London Xiao and Arnold A version of the paper can be found here. Want a summary of [...]
The Secret to Momentum is the 52-Week High???
The 52-Week High and Momentum Investing Thomas J. George and Chuan-Yang Hwang A version of the paper can be found here. Want a summary of academic [...]
Quantitative Value Research: Long-term P/E Ratio
The Long-Term Price-Earnings Ratio Anderson and Brooks A version of the paper can be found here. Want a summary of academic papers with alpha? Check out [...]
Mind the Gap: A Way to Enhance Momentum Profits
The Momentum Gap and Return Predictability Simon Huang A version of the paper can be found here. Want a summary of academic papers with alpha? Check [...]
Face-ripping Drawdowns and the Magic Formula
Due to a surge of interest from our "Long Cheap; Short Expensive. Buyer Beware" post, we decided to analyze the impact of changing the net exposure of the Magic [...]
Quantitative Value Research: Weighted P/E Bracket
Decomposing the Price-Earning Ratio Anderson and Brooks A version of the paper can be found here. Want a summary of academic papers with alpha? Check out [...]
Quantitative Value Research: A Summary of Various Value Metrics!
Analyzing Valuation Measures: A Performance Horse-Race Over the Past 40 Years Gray and Vogel A version of the paper can be found here and here. Want a [...]
Digging into the Enterprise Multiple Value Factor
New Evidence on the Relation Between the Enterprise Multiple and Average Stock Returns Loughran and Wellman A version of the paper can be found here. (Also described [...]
Value investing backtests: Our analysis of 13 AAII Value Strategies
Having spent 15+ years conducting value investing backtests to find the holy grail of systematic value investing, I sometimes wonder the following: Is there any [...]
Quantitative Value Research: Cyclically-adjusted B/M (CA-BM) Factor
On the Performance of Cyclically Adjusted Valuation Measures Gray and Vogel A version of the paper can be found here. Want a summary of academic papers [...]
The Fascinating Relationship Between Low Volatility and Value
A week ago, we posted an article that presented simulation performances of low-volatility strategies. The results illustrated that low-volatility portfolios do have higher returns and lower risks than [...]
Low-Volatility Investing: Avoid High Beta Stocks. Period.
We've posted simulation and research-based studies on value and momentum. The evidence was pretty clear: never buy expensive stocks (Value) and ride winners and cut [...]
The Quantitative Value Investing Philosophy
Benjamin Graham, who first established the idea of purchasing stocks at a discount to their intrinsic value more than 80 years ago, is known today as the father of value investing. Since Graham’s time, academic research has shown that low price to fundamentals stocks have historically outperformed the market. In the investing world, Graham’s most famous student, Warren Buffett, has inspired legions of investors to adopt the value philosophy. Despite the widespread knowledge that value investing generates higher returns over the long-haul, value-based strategies continue to outperform the market. How is this possible? The answer relates to a fundamental truth: human beings behave irrationally. We are influenced by an evolutionary history that preserved traits fitted for keeping us alive in the jungle, not for optimizing our portfolio decision-making ability. While we will never eliminate our subconscious biases, we can minimize their effects by employing quantitative tools.
How to calculate 3-factor (Fama-French) and 1-factor (CAPM) alpha
We've had a few questions related to 3-Factor Fama-French and 1-Factor (CAPM) alpha calculations recently (maybe it is midterm season?). Here is a deeper dive [...]