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 [...]
Quantitative Value Research: E/P or Size Effect?
Earnings Yields, Market Values, and Stock Returns Jaffe, Keim and Westerfield A version of the paper can be found here. Want a summary of academic papers [...]
Quantitative Value Research: Cyclically-adjusted P/E (CAPE) Factor
Stock Prices, Earnings, and Expected Dividends Campbell and Shiller A version of the paper can be found here. Want a summary of academic papers with alpha? [...]
Quantitative Value Research: Low P/E
For the next 30-60 days we'll be posting a recap research report on classic research related to quantitative value investing. This is the first part of the [...]
Mixing Momentum and Value: A Winning Combination?
Combining Value and Momentum Fisher, Shah and Titman (2014) A version of the paper can be found here. Want a summary of academic papers with alpha? [...]
Valuation Spreads Over Time: A Unique Market Timing Signal?
The blogosphere is spammed with commentary related to the current high market valuations and the inevitable crash that "must" ensue. We've even been involved in [...]
A Surprising Way to time Value and Momentum: Updated Analysis
Exploiting Factor Autocorrelation to Improve Risk Adjusted Returns K Oversby A version of the paper can be found here. Want a summary of academic papers with [...]
Interesting Tactical Asset Allocation Tool: Value portfolios
Exploiting Factor Autocorrelation to Improve Risk Adjusted Returns Kevin Oversby A version of the paper can be found here. Want a summary of academic papers with [...]
Value investing: Can you withstand the pain?
So the market took a tumble today--Feeling pain? Feeling emotional? Expecting the downward trend to continue? Be careful, your system 1 is terrorizing your ability [...]
Does the Small-cap “size” effect exist? Probably.
The traditional small-minus-big value-adjusted long/short factor (SMB) developed by Gene Fama and Ken French has arguably added NO value over time. Performance over the past 30 years [...]
Value Investing: Never Buy Expensive Stocks. Period.
We did a recent internal simulation study on the performance of cheap and expensive stocks based on a variety of valuation metrics. We looked at [...]
Gross Profits isn’t a Silver Bullet for Valuation Measurement!
Deflating Profitability Ball, Gerakos, Linnainmaa, and NikolaevA version of the paper can be found here.Want a summary of academic papers with alpha? Check out our Academic Research [...]
Shareholder Yield: Do longer-term calculations enhance performance?
Wes and I have a recent paper (found here) which examines a more complete measure of shareholder yield (dividends, net stock repurchases, and debt reduction). Here [...]
Can Market Valuations Be Effective Market-Timing Signals?
We know that valuation metrics such as the CAPE, or Shiller P/E, ratio are correlated with long-term returns (notice we didn't say "predict" long-term returns--that is [...]
Global Market Valuations based on EBIT/TEV
We ran some numbers on the large liquid universe of stocks (>2B USD) traded in EAFE countries. In total there are 1086 names in the [...]
Post Earnings Announcement Drift and Value/Growth Anomaly
When Two Anomalies Meet: The Post – Earnings Announcement Drift and the Value – Glamour Anomaly Yan and Zhao A version of the paper can [...]
Growth Beats Value…but with a lot of help!
When Growth Beats Value: Removing Tail Risk From Global Equity Momentum Strategies Clare, Seaton, Smith, and Thomas A version of the paper can be found here. [...]
P/E Performance in Australia and New Zealand
The Predictive Ability of P/E Ratio: Evidence from Australia and New Zealand Basu and O'Shea A version of the paper can be found here. Want a [...]
Does Value Investing Work in the Technology Sector?
A recent blog post suggests that value investing in the tech sector is a waste of time. The article tells a compelling story and argues for 2 points: Successful tech stock investing is done when the stocks are dear, not when they are cheap. Tech companies should not get credit for huge piles of cash on their balance sheets. The author then makes the claim that you can't make big money in cheap tech stocks and buying cheap tech doesn't work. We thought the blog post was thought-provoking and it inspired us to conduct a quick empirical analysis to ascertain if there was any truth to the claims.
Systematically Executing a Value Investment Philosophy
https://www.nantucketproject.com/wes-gray-from-concept-to-reality The story of our quantitative value algorithm as told at the Nantucket Project: [youtube url="http://youtu.be/3I9y2D5-Ol4"]