Alpha Architect

Merger Arbitrage as Diversification Strategy

By Larry Swedroe|April 14th, 2023|Event Driven Investing, Research Insights, Larry Swedroe|

Merger arbitrage is an investment style in which investors seek to buy shares of firms that are acquisition targets with the objective of realizing the difference between the amount for which the target is being acquired and the stock price of the target shortly after the acquisition is announced. The stock price of the target company typically sells below the acquisition price, reflecting the uncertainty of the deal being completed (the arbitrage spread). Betting on mergers is a classic hedge fund arbitrage strategy.

Trend-Following Filters – Part 6

By Henry Stern|April 12th, 2023|Research Insights, Trend Following, Guest Posts|

This article analyzes six trend-following indicators from a digital signal processing (DSP) frequency domain perspective in which the indicators are considered as digital filters and their frequency response characteristics are determined.

Global Factor Performance: April 2023

By Wesley Gray, PhD|April 11th, 2023|Index Updates, Research Insights, Factor Investing, Tool Updates, Tactical Asset Allocation Research|

Standardized Performance Factor Performance Factor Exposures Factor Premiums Factor Attribution Factor Data Downloads

Index Investing and the Informational Efficiency of Stock Prices

By Elisabetta Basilico, PhD, CFA|April 10th, 2023|Research Insights, Basilico and Johnsen, Academic Research Insight, Active and Passive Investing, Macroeconomics Research|

This article studies whether index investing has implications for the informational efficiency of stock prices.

Combining Reversals with Time-Series Momentum Strategies

By Larry Swedroe|April 7th, 2023|Larry Swedroe, Research Insights, Trend Following, Momentum Investing Research|

Jiadong Liu and Fotis Papailias contribute to the momentum literature with their study “Time Series Reversal in Trend-Following Strategies,” published in the January 2023 issue of “European Financial Management,” in which they examined the reversal property of various financial assets.

Wes Discusses Value Investing Foundations with Isaiah Douglass

By Wesley Gray, PhD|April 6th, 2023|Factor Investing, Podcasts and Video, Value Investing Research, Tax Efficient Investing, ETF Investing|

On this week's episode, Isaiah is joined by expert Dr. Wesley Gray, CEO of Alpha Architects, to discuss the concepts of value 🌱 investing.

How Did the FTX collapse Affect Traditional Assets?

By Tommi Johnsen, PhD|April 4th, 2023|Crypto, Research Insights, Basilico and Johnsen, Academic Research Insight|

In this study, the impact of the FTX collapse and bankruptcy is investigated across global financial markets.

DIY Trend-Following Allocations: April 2023

By Ryan Kirlin|April 3rd, 2023|Index Updates, Research Insights, Tool Updates, Tactical Asset Allocation Research|

Partial exposure to domestic equities. Partial exposure to international equities. No exposure to REITs. No exposure to commodities. Partial exposure to intermediate-term bonds.

Is a Naive 1/N Diversification Strategy Efficient?

By Larry Swedroe|March 31st, 2023|Research Insights, Larry Swedroe, Tactical Asset Allocation Research|

A simple 1/N factor diversification strategy will likely be at least as efficient as more “sophisticated” versions.

Call for speakers: Need quants with good ideas

By Wesley Gray, PhD|March 28th, 2023|Research Insights, Conferences|

This is an opportunity to get an all-expense paid trip (plus a stipend) to visit Australia! I'm sure one of our readers is qualified to deliver an excellent discussion for my friends in Melbourne.

Institutional Investors’ Impact on Factor Premiums

By Larry Swedroe|March 24th, 2023|Research Insights, Factor Investing, Larry Swedroe|

For anomalies that are risk-based, that is what we should expect to see because, while risk cannot be arbitraged away, cash flows can reduce the size of the premium. For the anomalies that are behavioral based, it appears that limits to arbitrage are still sufficient to allow them to persist post-publication.

Comparing past and present inflation rates can be tricky

By Tommi Johnsen, PhD|March 20th, 2023|Inflation Investing, Research Insights, Basilico and Johnsen, Academic Research Insight|

The objective of this article is to build better estimates of CPI headline and core inflation values so inflation comparisons over time are more reliable. The run-up in inflation we are currently experiencing is difficult to contextualize because it is inconsistent with past practices, weights on expenditures have changed, and the treatment of housing costs.

Research and Development, Expected Profitability, and Expected Returns

By Larry Swedroe|March 17th, 2023|Intangibles, Research Insights, Factor Investing, Larry Swedroe|

Regardless of the model used, an anomaly for all models is that the empirical evidence demonstrates that stocks with high research and development (R&D) expenses have delivered a premium.

Artificial Intelligence: the Past, the Present and the Future

By Elisabetta Basilico, PhD, CFA|March 13th, 2023|Research Insights, Basilico and Johnsen, Academic Research Insight, Machine Learning|

This article examines the state of Artificial Intelligence (AI). We examine its history with an eye toward what it may mean for the world in years to come.

Are Short Covering Trades Informative?

By Larry Swedroe|March 10th, 2023|Research Insights, Factor Investing, Larry Swedroe|

The importance of the role played by short sellers has received increasing academic attention in recent years. Short sellers help keep market prices efficient by preventing overpricing and the formation of price bubbles in financial markets. Market efficiency is important because an efficient market allocates capital efficiently. If short sellers were inhibited from expressing their views on valuations, securities prices could become overvalued and excess capital would be allocated to those firms.

Compression: Can the Value Spread Expand Forever?

By Ryan Kirlin|March 9th, 2023|Research Insights, Factor Investing, Value Investing Research|

We believe owning deep-value stocks is potentially interesting at these valuation peaks. But as I said in the previous two times I wrote this, the spread can get more extreme. At some point, we'd like to stop talking about the valuation spread and its potential effect on forward expected returns...and see that spread COMPRESS!

Global Factor Performance: March 2023

By Wesley Gray, PhD|March 7th, 2023|Index Updates, Research Insights, Factor Investing, Tool Updates, Tactical Asset Allocation Research|

Standardized Performance Factor Performance Factor Exposures Factor Premiums Factor Attribution Factor Data Downloads

Can We Improve Momentum Factor Investing via Salience Theory?

By Tommi Johnsen, PhD|March 6th, 2023|Research Insights, Basilico and Johnsen, Academic Research Insight, Behavioral Finance, Momentum Investing Research|

The contribution of salience theory to the theory of asset pricing turns out to be quite a profitable insight for momentum strategies.

Intangibles and the Value Factor

By Larry Swedroe|March 3rd, 2023|Intangibles, Research Insights, Factor Investing, Larry Swedroe|

This figure shows the long, short and long-short leg performance of the intangible value factor in comparison to the traditional value factor. The performance is shown for each of the four regions: U.S., Europe, Japan and Asia Pacific between June 1983 and December 2021. The monthly returns are ex-post volatility scaled to 5% p.m

DIY Trend-Following Allocations: March 2023

By Ryan Kirlin|March 1st, 2023|Index Updates, Research Insights, Tool Updates, Tactical Asset Allocation Research|

No exposure to domestic equities. Partial exposure to international equities. No exposure to REITs. No exposure to commodities. No exposure to intermediate-term bonds.

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