Global Factor Performance: February 2023
Standardized Performance Factor Performance Factor Exposures Factor Premiums Factor Attribution Factor Data Downloads
Factor Returns and the Information in Valuation Spreads
Given that valuations provide information on equity returns, it should not be surprising to learn that valuation spreads provide information on future factor premiums.
Do Investors Pay Less Attention to Women (Fund Managers)? YES
This article examines the research on gender bias and fund management. Specifically, we will focus on the gender-based attention bias.
Should investors be indifferent to dividend impact on stock returns?
In their 1961 paper, “Dividend Policy, Growth, and the Valuation of Shares,” Merton Miller and Franco Modigliani famously established that dividend policy should be irrelevant to stock returns. As they explained it, at least before frictions like trading costs and taxes, investors should be indifferent to $1 in the form of a dividend (causing the stock price to drop by $1) and $1 received by selling shares. This must be true, unless you believe that $1 isn’t worth $1. This theorem has not been challenged since, at least in the academic community.
DIY Trend-Following Allocations: February 2023
Partial exposure to domestic equities. Partial exposure to international equities. No exposure to REITs. Partial exposure to commodities. No exposure to intermediate-term bonds.
Political Beta
This example of research on political beta is an example of applying portfolio theory to problems associated with global politics.
Improving ESG Practices Boosts Valuations
This chart on creating shareholder value through ESG engagement is useful when evaluating if ESG practices boost valuations.
Institutional Investors and Corporate Carbon Footprint
This table of emissions and carbon intensity is relevant to the question of institutional investor influence over the carbon footprint.
Mitigating Risks with Factor Strategies
The following exhibit, which is useful to the subject of mitigating risks with factor strategies, provides the total return of the four benchmark portfolios and the five anomaly portfolios.
Expected Returns for Private Equity Will Probably Suck
The illiquid nature of the asset class makes the demystifying of private equity returns difficult to achieve under any circumstances, but the framework presented in this article should move the reader closer to the goal.
The Value Factor and Deleveraging
How do you separate the signal from the noise? To have confidence that a factor premium, or strategy, isn’t just the result of data mining - a lucky/random outcome - we recommended that you should require evidence that the premium has been not only persistent over long periods of time and across economic regimes, but also pervasive across sectors, countries, geographic regions and even asset classes; robust to various definitions (for example, there has been both a value and a momentum premium using many different metrics); survives transactions costs; and has intuitive risk- or behavioral-based explanations for the premium to persist.
Global Factor Performance: January 2023
Standardized Performance Factor Performance Factor Exposures Factor Premiums Factor Attribution Factor Data Downloads
Can Investors Save the Planet? Unlikely.
Can the planet earth be saved by investors? Find out what the research says!
Optimal Trend Following with Transaction Costs
In spite of the widespread popularity of trend-following investing, little is still known about optimal trend-following with transaction costs.
DIY Trend-Following Allocations: January 2023
No exposure to domestic equities. No exposure to international equities. No exposure to REITs. Partial exposure to commodities. No exposure to intermediate-term bonds.
Automation and Asset Pricing Theory
In this article about asset pricing theory, we examine the research on the impact of technological advances that displace human labor in favor of machine capital to asset pricing.
Expected Returns to Green Stocks
The past decade has seen a dramatic growth in sustainable investing—applying environmental, social and governance (ESG) criteria to investment strategies. Investments considered environmentally friendly are often referred to as “green,” while “brown” denotes the opposite. Important questions for investors are: What are the expected returns to green stocks? What does their past performance tell us about their future expected returns? We begin by looking at what economic theory tells us our expectations should be.
Measuring Geopolitical Risk
Although geopolitical risk has traditionally been approached from a qualitative aspect, what makes it a novel risk is the application of innovative techniques to measure it.
The Performance of Multi-Factor Long-Short Portfolios in Various Economic Regimes
To determine if a multi-factor approach has provided diversification benefits in terms of exposure to economic cycle risks, the research team at Counterpoint evaluated returns to multifactor long-short strategies, stocks, and 1-month T-bills in a variety of economic conditions (recession or no recession, high or no high inflation, and stagflation) over the period July 1963-August 2022.
Book Review: The Bogle Effect by Eric Balchunas
This is a review of Eric Balchunas's book "The Bogle Effect: How John Bogle and Vanguard Turned Wall Street Inside Out and Saved Investors Trillions."