Key Research

Trend Following: The Epitome of No Pain, No Gain

By |2019-11-18T08:36:31-05:00June 26th, 2019|Research Insights, Trend Following, Key Research|

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, no premium." Cliff Asness may put it best when he [...]

Trust the Process

By |2018-08-16T08:10:20-04:00June 21st, 2018|Research Insights, Factor Investing, Trend Following, 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 |2018-10-09T17:55:33-04:00November 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 [...]

Do Portfolio Factors or Characteristics Drive Expected Returns?

By |2019-04-29T13:30:20-04:00October 31st, 2017|Research Insights, Factor Investing, Key Research, Value Investing Research|

This article examines a somewhat over-looked, but important, discussion that raged among academic researchers in the late 1990's and early 2000's. The topic: factors versus characteristics. What do you mean, "Factors versus characteristics?" We often [...]

Factor Investing: Evidence Based Insights

By |2017-10-06T18:16:34-04:00June 22nd, 2017|Research Insights, Factor Investing, 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 Global Value Momentum Trend Philosophy

By |2018-11-06T08:08:20-05:00June 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 [...]

“Alternative” Facts about Formulaic Value Investing

By |2017-08-18T17:12:00-04:00April 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 |2018-08-29T11:21:06-04:00February 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, [...]

1042 Qualified Replacement Property: An Overview of ESOP Rollover Strategies

By |2019-02-06T18:39:22-05:00December 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 updatedArticle updated February 6, [...]

Creating an Alternative Investment Strategy with Value and Momentum

By |2017-08-18T17:07:49-04:00July 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 [...]

Even God Would Get Fired as an Active Investor

By |2018-05-23T10:12:27-04:00February 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 [...]

How to Use Active Funds in a Diversified Portfolio

By |2017-08-18T17:03:16-04:00September 30th, 2015|Introduction Course, Investor Education, Key Research, 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 [...]

The Sustainable Active Investing Framework: Simple, But Not Easy

By |2019-10-31T14:48:55-04:00August 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...

Avoiding the Big Drawdown with Trend-Following Investment Strategies

By |2019-10-22T14:09:30-04:00August 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.

From the Frontlines to Finance: How the Marines Shaped Our Investment Philosophy

By |2017-09-28T12:22:13-04:00May 25th, 2015|Research Insights, Key Research, $SPY|

Serving in the Marine Corps was an unforgettable experience. Civilians often tell us “thank you for your service”; however, the real “thanks” is due to the Corps for giving us valuable life lessons. The not-so subtle teachings bestowed upon us by heavily muscled, insanely aggressive Marine Corps Drill Sergeants are still, literally, ringing in our ears: “Listen here, pond scum, you better run faster, shoot straighter, and decide quicker if you are going to win in battle!” Years later, we would test that theory in real-time, battling insurgents in Iraq. As we trade in our flak jackets for laptops and neckties, the lessons learned in combat and are not only relevant, but vital on the battlefield of high finance. Four core lessons apply to frontlines and finance: Humans Are Emotional: Systematic processes beat behavioral bias; Rambo isn't Realistic: Act based on evidence, not on stories; Complacency Kills: Focus on fundamentals and never stop learning; Integrity is Everything: Do things right and do the right thing.

Tactical Asset Allocation: Beware of Geeks Bearing Formulas

By |2017-08-18T16:56:15-04:00May 19th, 2015|Research Insights, Key Research, Tactical Asset Allocation Research, $GMOM|

How Should I Tactically Allocate my Assets? A lot of investors ask this question as their wealth grows and the number of financial products grows exponentially. In order to generate a response, investors pay money to [...]

How to Combine Value and Momentum Investing Strategies

By |2017-08-18T17:03:25-04:00March 26th, 2015|Key Research, Value Investing Research, Momentum Investing Research, $SPY, $mtum, $vlue, $voo|

The evidence suggests that we keep highly active exposures to value and momentum in their purest forms (assuming we are doing high-conviction non-watered down versions of the anomalies). Blending the strategy dilutes the benefit of value and momentum portfolios. The summary of the benefits of a pure value and a pure momentum approach can be summarized as follows: Easier ex-post assessment, stronger portfolio diversification benefits, and stronger expected performance.