Key Research

Trust the Process

By |2018-08-16T08:10:20+00:00June 21st, 2018|Factor Investing, Trend Following, Research Insights, Key Research, Value Investing Research, Momentum Investing Research|

As a native Philadelphian and huge basketball fan, I fully agree with the 76ers fan's rally cry -- Trust the Process. Even the players, such as Joel Embiid, have echoed the sentiment of the fans: [...]

Factor Investing and Trading Costs

By |2018-05-17T08:52:08+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 [...]

Factor Investing: Evidence Based Insights

By |2017-10-06T18:16:34+00:00June 22nd, 2017|Factor Investing, Research Insights, Key Research|

I will be talking on the Factor Investing panel at the upcoming Evidence-Based Investing Conference in Dana Point, CA next Sunday –Tuesday. I am excited for the opportunity to chat, and figured I would highlight [...]

The Value Momentum Trend Philosophy

By |2018-06-14T08:40:41+00:00June 6th, 2017|Factor Investing, Trend Following, Research Insights, Key Research, Value Investing Research, Momentum Investing Research|

If you've been reading our blog for a number of years you're 1) probably a finance geek, and you're 2) probably tired of us discussing the following themes: Value investing: buy cheap stocks (see our [...]

Academic Factor Exposure Versus Fund Factor Exposure

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

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 [...]

“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 [...]

Factor Investing is More Art, and Less Science

By |2018-07-25T10:26:01+00:00February 3rd, 2017|Factor Investing, Research Insights, 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, [...]

1042 Qualified Replacement Property: An Overview of ESOP Rollover Strategies

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

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 [...]

Is the Low Volatility Anomaly driven by Lottery Demand?

By |2017-08-18T17:01:38+00:00November 30th, 2016|Research Insights, Key Research, Low Volatility Investing|

A few years ago I wrote a summary on a working paper titled "A Lottery Demand-Based Explanation of the Beta Anomaly." The paper is still a working paper, and has been updated (unfortunately they took [...]

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 [...]

Not so Simple: Valuations and Low Volatility Strategies

By |2017-08-18T16:59:46+00:00May 17th, 2016|Key Research, $SPLV, Low Volatility Investing|

Low volatility funds are everywhere. The reasons for their proliferation are clear: Who wouldn't want to own something with the label "low volatility" and Recent performance has been great. Open the AUM floodgates! But perhaps [...]

Why We Built An Active Robo-Advisor and Why You Should Too.

By |2018-02-20T18:31:04+00:00March 3rd, 2016|Key Research, Robo Advisor, Business Updates|

Assuming you haven't been living under a rock, you've almost certainly heard something about robo-advisors. Millenials seem to love them while "old school" advisors are dismissive at best or terrified at worst. Some even believe they [...]

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 [...]

The World’s Longest Trend-Following Backtest

By |2018-01-16T20:53:30+00:00November 9th, 2015|Trend Following, Key Research, Tactical Asset Allocation Research|

Were in the middle of an academic research project and we ran a simple long-term trend-following model from January 1, 1801 to September 30, 2015. Recently, there has been some research on the performance of trend-following rules [...]

How to Pick Smart Beta ETFs

By |2017-08-18T17:03:18+00:00October 24th, 2015|Research Insights, Key Research, Tactical Asset Allocation Research, Active and Passive Investing|

Investors are probably unaware of the price they are paying for the "active" piece of Smart Beta.Using a simple framework, we show that buying a Smart Beta product at 45bps is equivalent to paying 5bps for a generic passive exposure and 138.33 bps for the active exposure!How many investors are aware that "low-cost" smart beta products might be implicitly charging fees that are equivalent to many active mutual fund fees?

How to Use Active Funds in a Diversified Portfolio

By |2017-08-18T17:03:16+00:00September 30th, 2015|Key Research, Investor Education, Introduction Course, Tactical Asset Allocation Research|

Active management has been out of favor for a while--high fees, high tax burdens, and poor long-term performance. But with the slow rise of actively managed ETFs, which have lower costs and more tax efficiency [...]

Rise of the Machines: Predicting Winners and Losers on the Robo-Advisor Battlefield

By |2017-08-18T16:57:52+00:00August 27th, 2015|Key Research, Tactical Asset Allocation Research|

Robos are changing the landscape of financial services and consumers will reap the rewards. But will the computers replace humans? Unlikely. The psychology coach benefit is hard to replicate with a computer. However, robos will encourage human-based advisors to up their game. Slothosaurus will go extinct—thankfully! First iteration passive robo-advisors will create a lot of value for consumers, but capture little value for their VC investors, unless perhaps they are bought out. Finally, differentiated robo advisors and traditional advisors who embrace technology will score big wins for both consumers and their shareholders.

The Sustainable Active Investing Framework: Simple, But Not Easy

By |2018-07-16T15:25:05+00:00August 17th, 2015|Key Research, Behavioral Finance|

We cannot overemphasize that identifying sustainable alpha in the market is no cakewalk. More importantly, being smart, having superior stock-picking skills, or amassing an army of PhDs to crunch data is only half of the equation. Even with those tools, you are still only one shark in a tank filled with other sharks. All sharks are smart, all sharks have a MBA or PhD from a fancy school, and all the sharks know how to analyze a company. Maintaining an edge in these shark infested waters is no small feat, and one that only a handful of investors has accomplished.In order to achieve sustainable success as an active investor, one needs not only skill, but also an understanding of human psychology, and an appreciation of market incentives (behavioral finance). We start our journey where mine began: as an aspiring PhD student studying at the University of Chicago. Let the adventure begin...This post is not meant to convert a passive investor into an active investor; however, we do explain why we believe active investing can sustainably beat passive strategies in the long run. Plus, we bring to bear many years of cumulative research and experience to support our arguments.We cannot overemphasize that alpha in the market is no cakewalk. More importantly, being smart, having superior stockpicking skills, or amassing an army of PhDs to crunch data is only half of the equation. Even with those tools, you are still only one shark in a tank filled with other sharks. All sharks are smart, all sharks have a MBA or PhD from a fancy school, and all the sharks know how to analyze a company. Maintaining an edge in these shark infested waters is no small feat, and one that only a handful (e.g., we can count them in one hand) of investors has successfully accomplished.In order too achieve sustainable success as an active investing, one needs both skill and an understanding of human psychology and market incentives (behavioral finance). We start our journey where mine began: as an aspiring PhD student studying under Eugene Fama at the University of Chicago. Let the adventure begin...

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