How to use the Fama French Model
The CAPM is prolific, but doesn't appear to work! In this blog, we discuss our views on how to use the Fama French model. (Note: [...]
Stop Using the Altman-Z Score.
Ed Altman is simply a legend. Everyone in finance is familiar with the Altman Z-Score and many analysts use it religiously--despite the fact there has [...]
Juicing up the Accrual Anomaly
Percent Accruals Nader Hafzalla, Russell Lundholm, and Matt Van Winkle A version of the paper can be found here. Abstract: We document how the effectiveness [...]
Magic Formula and Small Caps–The Missing Link?
A reader recently commented in response to our study on the Magic Formula, which questions the 31% CAGR performance of the strategy over the 1988--2004 [...]
Taxes are more important than alpha.
Paying taxes is my least favorite topic. Figuring out how to not pay taxes is my favorite topic. Before I continue, if you want to read [...]
Mission Impossible: beating the market over long periods of time
I've been thinking about "extreme" returns recently. After all, who wouldn't mind earning a few extra bucks in the stock market? We all hear about [...]
Textual Analysis and Trading Strategies
When is a Liability not a Liability? Textual Analysis, Dictionaries, and 10-Ks. Tim Loughran and Bill McDonald A published version of the paper can be [...]
More Magic Formula Analysis
As a professor by day, I spend a lot of time doing research and studying financial data. Recently, my research assistant and I have been [...]
Follow the Short-Sell Demand
Supply and Demand Shifts in the Shorting Market Lauren Cohen, Karl B. Diether and Chirstopher J. Malloy A version of the paper can be found [...]
How “Magic” is Magic Formula Investing?
The underlying concept of magic formula investing is a genius marketing platform, but it is unclear how "magic" the formula actually is--examine 'cheapness,' examine 'quality,' combine [...]
Institutional Investor on Twitter Trading
Institutional Investor has an article related to trading on Tweets. Here is our take on the trading strategy We are quoted in the article: "Not everyone [...]
The Ultimate Short Book.
Identifying Overvalued Equity Messod Beneish and Craig Nichols A version of the paper can be found here. Live implementation data can be found at Empirical Finance [...]
Quantitative versus Fundamental Value–Let’s get ready to RUMMMBLE!
I like to laugh, and I hope you to do. We put together a short video highlighting the intellectual battle between quantitative investors and fundamental [...]
Long-Term Trendspotting: Demographics Matter
Demographic Changes, Financial Markets, and the Economy Robert Arnott and Denis Chaves A version of the paper can be found here. Abstract: It seems natural [...]
Technical Analysis may actually work!
A New Anomaly: The Cross-Sectional Profitability of Technical Analysis Yufeng Han, Ke Yang, and Guofu Zhou A version of the paper can be found here. [...]
Is Trading with Twitter only for Twits?
Tweets and Trades: The Information Content of Stock Microblogs Timm Sprenger and Isabell Welpe A version of the paper can be found here. Abstract: Microblogging [...]
Ben Graham Trading Rules Backtest
Our recent Ben Graham post generated a lot of interest and a LOT of emails. One of the more interesting questions asked was, "How does [...]
Backtesting Ben Graham
Charles Mizrahi, over at http://www.hiddenvaluesalert.com/, suggested we backtest a simple Ben Graham strategy mentioned in a 1976 article he dug up in Medical Economics. Charles has been [...]
Goodwill Gone Bad
Have Goodwill Accounting Gone Bad? Kevin Li and Richard Sloan A version of the paper can be found here. Live implementation data can be found [...]
Satisfying Employees: A Satisfying Investment Strategy?
Are you trying too hard? Does the Stock Market Fully Value Intangibles? Employee Satisfaction and Equity Prices. Alex Edmans A version of the paper can be [...]