Key Research

Even God Would Get Fired as an Active Investor

By |2018-05-23T10:12:27+00:00February 2nd, 2016|Research Insights, Key Research, Tactical Asset Allocation Research|

Empirical asset pricing research can sometimes get monotonous because you end up circling back relentlessly to the same conclusions: value, momentum, trend-following are all interesting, and yet, markets are remarkably competitive (perhaps not efficient). But, sometimes, research [...]

Our Value Proposition: Affordable Alpha

By |2018-06-06T08:40:38+00:00September 16th, 2014|Key Research|

Our mission is to empower investors through education. This mission is our passion and what drives us to go to work everyday. But this mission is not our product. Our product is Affordable Alpha: We seek to delivers alpha (highly differentiated risk/reward profiles) at low costs, thereby giving sophisticated (taxable) investors a higher chance of winning net of fees and taxes.

The Global Value Momentum Trend Philosophy

By |2018-11-06T08:08:20+00:00June 6th, 2017|Research Insights, Factor Investing, Trend Following, Key Research, Value Investing Research, Momentum Investing Research|

Our Global Value Momentum Trend Index ("GVMT" or "GVMT Index") can be summarized as follows:   Turns out that this simple statement summarizes over a decade of research efforts on our end. We've [...]

The Quantitative Value Investing Philosophy

By |2018-12-13T05:55:13+00:00October 7th, 2014|Research Insights, Introduction Course, Key Research, Value Investing Research|

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.

Factor Investing and Trading Costs

By |2018-10-09T17:55:33+00:00November 28th, 2017|Factor Investing, Key Research, Momentum Investing Research|

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, the debate has broader interest among the investing public. Some investors [...]

“Alternative” Facts about Formulaic Value Investing

By |2017-08-18T17:12:00+00:00April 22nd, 2017|Research Insights, Key Research, Behavioral Finance, Value Investing Research, $vlue, $brk-a|

A new paper, "Facts about Formulaic Value Investing," is making the rounds and professes to plunge a dagger directly into the heart of systematic value investors. Half of my inbox is filled with questions regarding this [...]

1042 Qualified Replacement Property: An Overview of ESOP Rollover Strategies

By |2018-01-17T12:12:00+00:00December 28th, 2016|1042 QRP Solutions, Key Research|

Executive Summary Employee Stock Ownership Plans (“ESOP”) offer a variety of liquidity, tax and operating benefits to business owners who are contemplating a sale or partial sale of their business. This article is intended to [...]

A Framework for Investment Manager Selection: Stick to the FACTS

By |2018-01-17T13:52:48+00:00September 16th, 2014|Key Research|

Used car salesmen types are everywhere, especially in the asset management business. What defines the used car salesman? Used car salesmen are often focused on selling something—anything on their lots that has four wheels—rather than identifying the right vehicle for the client. The same holds true with the asset management business. Some asset management salesmen just want to sell something—anything, regardless of its suitability.Alpha Architect’s experience working with family offices in the dual role of consultant and investment manager has given us the opportunity to see a lot of indecipherable marketing materials and esoteric investment strategies over the years, neither of which appear to be in the best interest of the investor. We’ve always sought a simple framework that would facilitate a quick evaluation of any strategy that came through the door, but nothing really existed.Necessity is indeed the mother of invention: We developed our own framework for determining strategy selection and assessment. Our method is based on a few simple concepts, which should be clearly understood within the context of any investing approach, regardless of objective. In the end, choosing investment opportunities simply comes down to the FACTS.

A Simulation Study on Simple Moving Average Rules

By |2018-04-25T14:58:33+00:00July 28th, 2014|Key Research, Tactical Asset Allocation Research|

The mention of technical analysis in the halls of academia can cause serious angst. The disdain for technical analysis likely stems from a firm belief that markets can't possibly be weak-form inefficient. The other reason researchers [...]

Academic Factor Exposure Versus Fund Factor Exposure

By |2017-10-06T12:42:05+00:00April 26th, 2017|Factor Investing, Tool Updates, Key Research|

Tomorrow I'll be sitting with Pat O'Shaughnessy and Ben Johnson to discuss "Straight Talk About Smart Beta." Here is a link to the big Morningstar event. In preparation for our discussion we were spitballing ideas [...]

An Introduction to Investing and How to Use Our Site

By |2018-08-27T18:20:51+00:00January 3rd, 2015|Research Insights, Introduction Course, Investor Education, Key Research, Business Updates|

What We Do? We are a research-intensive asset management firm with a focus on high-conviction value and momentum factor exposures. More broadly, we seek to deliver "Affordable Alpha," which means highly differentiated investment strategies at lower costs, thereby giving sophisticated [...]

Avoiding the Big Drawdown with Trend-Following Investment Strategies

By |2018-10-15T16:30:54+00:00August 13th, 2015|Research Insights, Trend Following, Key Research, Tactical Asset Allocation Research|

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.

Behavioral Finance and Investing: Are you Trying Too Hard?

By |2018-05-31T09:01:38+00:00May 13th, 2014|Key Research, Behavioral Finance|

Everyone makes mistakes. It’s part of what makes us human. Because humans understand their actions are sometimes flawed, it was perhaps inevitable that the field of psychology would develop a rich body of academic literature to analyze why it is that human beings often make poor decisions. Although insights from academia can be highly theoretical, our everyday life experiences corroborate many of these findings at a basic level: “I know I shouldn’t eat the McDonalds BigMac, but it tastes so good.” Because we recognize our frequent irrational urges, we often seek the judgment of experts, to avoid becoming our own worst enemy. We assume that experts, with years of experience in their particular fields, are better equipped and incentivized to make unbiased decisions. But is this assumption valid? A surprisingly robust, but neglected branch of academic literature, has studied, for more than 60 years, the assumption that experts make unbias decisions. The evidence tells a decidedly one-sided story: systematic decision-making, through the use of simple quantitative models with limited inputs, outperforms discretionary decisions made by experts. This essay summarizes research related to the “models versus experts” debate and highlights its application in the context of investment decision-making. Based on the evidence, investors should de-emphasize their reliance on discretionary experts, and should instead approach investment decisions with systematic models. To quote Paul Meehl, an eminent scholar in the field, “There is no controversy in social science that shows such a large body of qualitatively diverse studies coming out so uniformly in the same direction as this one [models outperform experts].”

Can Market Valuations Be Effective Market-Timing Signals?

By |2017-08-18T17:08:24+00:00June 12th, 2014|Research Insights, Key Research, Value Investing Research, Tactical Asset Allocation Research|

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 debatable). Here is a brief background on the measure: http://alphaarchitect.com/blog/2011/10/06/the-shiller-pe-ratio/ [...]

Creating an Alternative Investment Strategy with Value and Momentum

By |2017-08-18T17:07:49+00:00July 7th, 2016|Key Research, Value Investing Research, Momentum Investing Research, Tactical Asset Allocation Research|

Anyone who follows our website should be familiar with the extensive evidence behind our favorite stock selection strategies: Value Investing Momentum Investing The evidence suggests that high-conviction (<50 stock) value and momentum portfolios, deployed as a system, seems like [...]

Distribution Economics: Understanding Wall Street’s Conflict of Interest Problem

By |2017-08-18T17:06:44+00:00March 11th, 2015|Key Research, $SPY, $wfc, $jpm, $bac, $c, $usb, $gs|

The simple matter is that most clients know how to buy groceries, but few know how to purchase financial products. In the murky world of financial services, clients may be buying products for the first time. More importantly, this purchase is the driver of their long-term financial security. Years of hard work, thrift, and responsible life choices, are baked into each and every retirement portfolio that a banker must now serve. In short, the stakes are too high and the cards are stacked too favorably towards one party. Fiduciary responsibility matters in financial services more than in any other product category outside of urgent medical care. Shouldn't this fiduciary have your best interests at heart? Just as you don't want your doctor to receive kickbacks from Pfizer for overdosing you on Oxycodone, why would you want your financial advisor--or their institution--to receive kickbacks for overdosing you on inefficient, overpriced, investment product that probably won't help you achieve your investment goals?Moral of the story: Ask your banker, or bank-affiliated advisor these questions. If you get answers that sound like the ones above, it might be time to buy a car or an airline ticket, because traveling via railroad is a thing of the past.

Does the Small-cap “size” effect exist? Probably.

By |2018-05-31T13:34:46+00:00July 2nd, 2014|Research Insights, Key Research, Value Investing Research|

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 has been flat and highly volatile (1983-2013). The results [...]

Factor Investing is More Art, and Less Science

By |2018-08-29T11:21:06+00:00February 3rd, 2017|Research Insights, Factor Investing, Key Research, Value Investing Research, Momentum Investing Research, Size Investing Research|

Albert Einstein is reported to have said the following: The more I learn, the more I realize how much I don’t know. I can relate. Having studied finance for a long time (PhD, professor, books, [...]

Yes No
This website uses cookies and third party services. Settings Ok

Cookies

We use “cookies” on this site. A cookie is a piece of data stored on a site visitor’s hard drive to help us improve your access to our site and identify repeat visitors to our site. For instance, when we use a cookie to identify you, you would not have to log in a password more than once, thereby saving time while on our site. Cookies can also enable us to track and target the interests of our users to enhance the experience on our site. Usage of a cookie is in no way linked to any personally identifiable information on our site. Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies.

Embedded Content

Articles on this Site may include embedded content (e.g. videos, images, articles, etc.). Embedded content from other websites behaves in the exact same way as if the visitor has visited the other website.These websites may collect data about you, use cookies, embed additional third-party tracking, and monitor your interaction with that embedded content, including tracking your interaction with the embedded content if you have an account and are logged in to that website.