To determine if a multi-factor approach has provided diversification benefits in terms of exposure to economic cycle risks, the research team at Counterpoint evaluated returns to multifactor long-short strategies, stocks, and 1-month T-bills in a variety of economic conditions (recession or no recession, high or no high inflation, and stagflation) over the period July 1963-August 2022.
Pastor, Stambaugh, and Taylor (2015) and Zhu (2018) provide significant evidence of decreasing returns to scale (DRS) at both the fund and industry levels. The authors examine the robustness of their inferences after Adams, Hayunga, and Mansi (2021) critique the above two studies.
Standardized Performance Factor Performance Factor Exposures Factor Premiums Factor Attribution Factor Data Downloads
This paper investigates the effects of volatility scaling on factor portfolio performance and factor timing.
Given that tightening monetary policy increases economic risks, Simpson and Grossman provided compelling evidence of a risk explanation for the size factor. For those investors who engage in tactical asset allocation strategies (market timing), their evidence suggests that it might be possible to exploit the information. Before jumping to that conclusion, I would caution that because markets are forward-looking, they should anticipate periods of Fed tightening and the heightened risks of small stocks.
In this article, we examine the research on investing during inflationary regimes such as deflation, inflation, and stagflation. Factors perform relatively well in all regimes on a real basis.
Since it is likely that both the Relative Sentiment and Trend Following strategies will underperform at some points in the future, “a 50-50 combination of TF and RS might reduce the emotional volatility an investor may experience from holding only the underperforming strategy.”
This paper explores the question of option momentum by examining what the research says about the performance of option investments across different stocks.
Industry and factor momentum should be viewed as recent developments in the wider momentum story, although these aggregated measures of momentum lack any theoretical foundation.
Jules van Binsbergen, Liang Ma and Michael Schwert, authors of the September 2022 study “The Factor Multiverse: The Role of Interest Rates in Factor Discovery,” posed an interesting question: Are the findings of at least some of the reported anomalies the direct result of the 40-year secular decline in global interest rates and thus not really anomalies?
Standardized Performance Factor Performance Factor Exposures Factor Premiums Factor Attribution Factor Data Downloads
We study the cross-section of stock returns using a novel constructed database of U.S. stocks covering 61 years of independent data.
Soroush Ghazi and Mark Schneider authors of the August 2022 study “Market Risk and Speculation Factors” decomposed the excess market return (the equity risk premium) into speculative (in the simple sense that it is negative, reflecting a premium investors pay to hold assets that are more subject to speculative demand) and non-speculative, or risk (in the simple sense that it is positive, a necessary characteristic for a factor to reflect compensation for risk) components.
In this article, the author examines the research published over the last 30 years on momentum and its theoretical credibility. One of the original momentum articles was published by Jegadeesh and Titman in 1993, and is considered the seminal work on the topic. The research review contained in this publication begins with the 1993 work and confines itself to only the highest quality journals among the plethora of work that has been published on momentum.
This article discusses the academic research about the Momentum Gap and the role that its predictive potential may have in reducing momentum crashes, hence possibly improving performance.
In this article, the author examines several important questions related to asynchronous trading, or the variation in trading frequency that occurs when trading stocks or other assets.
It is well documented in the literature that over the long term, low-investment firms have outperformed high-investment firms—with the negative relation between asset growth (AG) and future stock returns particularly featured by the overvaluation of high AG stocks.
Standardized Performance Factor Performance Factor Exposures Factor Premiums Factor Attribution Factor Data Downloads
Atilgan et al. contribute to the momentum literature with “Momentum and Downside Risk in Emerging Markets.”
Does gender matter in institutional investing?
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