Alpha Architect

Is There A Bubble In Private Credit?

While the media headlines are preaching doom, the fundamentals are telling a very different story—credit spreads have widened, and EBITDA multiples are the lowest they have been in a decade. The bottom line is that for investors able to accept its limited liquidity, private, senior, secured and sponsored by private equity direct lending continues to be a compelling component of a diversified portfolio deliver what has always attracted investors: high current income, resilience through market cycles, and a disciplined approach to risk management. We are far from a bubble.

Nine Lessons the Market Taught in 2024

In 2024 investors were provided with nine lessons. Many of them are repeats from prior years. Unfortunately, too many investors fail to learn them—they keep making the same errors.

Long-Only Value Investing: Size Doesn’t Matter!

Summary: no difference in average returns between large-cap and small-cap portfolios. There you have it. The small-cap sacred cow has been slaughtered.

Box Spreads: An Alternative to Treasury Bills?

Box spreads represent an opportunity to borrow and lend via the options market, at similar (and often better) rates than those that are available in the treasury bill market.

Does Emerging Markets Investing Make Sense?

The analysis above suggests that portfolios that include or exclude emerging allocations are roughly the same. For some readers, this may be a surprise, but for many readers, this may not be "news." That said, even if the data don't strictly justify an Emerging allocation, the first principle of "stay diversified" might be enough to make an allocation.

Of course, the assumptions always matter.

How to Start an ETF? Resources and FAQ

We get the following question at least 1x a day: "How do I start an ETF? Because we have so many requests for information on the topic of "How to Start an ETF?", Wes asked that I compile a list of materials on the topic and a "FAQ" to address all of your burning questions.

Value and Momentum Investing: Combine or Separate?

When it comes to Value and Momentum investing we often get asked the following set of questions: Should I use value and momentum, in one [...]

How Portfolio Construction Impacts the Reliability of Outcomes

We are proponents of focused (i.e., 50 stock) long-only value and momentum factor strategies.[ref]Please note that in the context of long/short factor investing, which is [...]

A Short Research Library Outlining Why Traditional Stock Picking is Challenging

There are no "right" answers when it comes to financial markets. There are generally trade-offs to all decisions. For example, stocking picking can be incredible [...]

Value Investing: An Examination of the 1,000 Largest Firms

Among stock investors, a common strategy/belief held is Value investing -- buying stocks that are relatively cheaper on price/fundamental ratios. Is Value investing dead? The [...]

Value Factor Diversification: Is Quality Better Than Momentum?

What if your portfolio was only based on one idea? Something like “stocks always go up” or “value always beats growth.” You may be learning [...]

ETF-prenuers: An Introduction to ETF White Label Services

Interested in starting an ETF? Interested in converting a managed account, hedge fund, or mutual fund into an ETF? Simply want to learn more about [...]

What’s the Story Behind EBIT/TEV?

A common question we receive at Alpha Architect is the following: "Why do you focus on EBIT/TEV as a value screen for stocks instead of [...]

Is Passive Investing Better than Active Investing?A Critical Review.

The broad thrust of this paper is that Sharpe’s proposition is not water-tight upon closer examination, and certainly should not be received as gospel.

Trend Following: The Epitome of No Pain, No Gain

One of the recurring themes we see in our research is the concept of "no pain; no gain." Or as Corey Hoffstein says, "No pain, [...]

Momentum Investing, Like Value Investing, is Simple, but NOT Easy

We've covered momentum investing extensively over the years, to include 94 posts, a book on the subject, and numerous discussions on various podcast outlets. There [...]

Why you should trust the investment process (even though it’s hard)

In this article, we discuss why trusting an investment process can be very hard, and how you should approach the challenge. Trust the Process - [...]

Do factor portfolios survive transaction costs?

Factor investing, and the associated intellectual battles, have raged for decades in academic finance journals. However, now that factor investing has gone mainstream via ETFs, [...]

Do Portfolio Factors or Characteristics Drive Expected Returns?

This article examines a somewhat overlooked, but important, discussion that raged among academic researchers on the source of the value investing premium in the late 1990s and early 2000s—the topic: factors vs characteristics.

Reconciling Individual Stock Returns and Factor Portfolio Returns

Those in the financial media have recently been writing multiple stories on a fascinating working paper, "Do Stocks Outperform Treasury Bills?" by Hendrik Bessembinder. We [...]

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