This paper shows how return expectations are formed: largely via a common “building-block” model (dividend yields, earnings growth, inflation, P/E changes), and how they vary across asset classes, time periods, and institutions.
"Buy the dip" (BTD) has become one of the most popular investment mantras of recent years, especially since the COVID-19 market recovery in 2020. The strategy seems intuitive: when markets fall, buy at a discount and wait for the inevitable rebound. However, BTD is not foolproof. By design, it performs well when market declines are brief, but poorly when declines mark the beginning of a prolonged drawdown. A new paper from AQR Capital Management, “Hold the Dip,” examines the empirical evidence and puts this popular strategy to the test.
This paper examines how cultural biases affect high-stakes decisions in a FinTech setting, showing that even when information is the same, the social groups we prefer can lead us into worse outcomes. The result: bias isn’t just unethical, it’s expensive.
This paper builds a new measure of “equity market volatility” using newspaper articles and finds that policy-related news (fiscal, monetary, trade, regulation) explains a large share of volatility spikes.
Gold has jumped from sleepy sideshow to dominant market narrative in a short span of time. For years, owning gold did not move the needle, and only introduced unnecessary noise to investors' portfolios. Then, in 2023, things started silently shifting in the background. Today, after a parabolic mid-summer move followed by a short correction, investors are now asking themselves: is it too late to buy gold?
Momentum works, across markets, time periods, and portfolio designs. But it also has weak spots, especially during market reversals, which risk-aware construction can help manage.
Historically, the finance community (both academics and investment firms) has divided stocks into two categories: cheap and expensive. Initially, the book-to-price ratio was used to [...]
Over the past two decades, middle-class Americans have quietly changed how they invest. This paper shows that the share of investable wealth held in stocks has risen—and become systematically linked to age. The driving force? The Pension Protection Act (PPA), which made target date funds (TDFs) the default option in retirement plans.
The guest article below was submitted via a friend (Sailesh Radha) who develops software that helps investors analyze data (Borealis). We have no affiliation/connection to [...]
We're going to examine the market’s current concentration and valuation to better understand return expectations going forward. But reader beware; this isn’t some bold macro prediction to scare you away from sensible investing. It’s a reminder that markets move in cycles, valuations eventually matter, and history has a way of humbling even the most confident forecasts.
Using thousands of real pitch recordings, the authors find that presentation style drives funding success even when fundamentals are identical. The catch: the most persuasive founders don’t always build the best businesses.
While many investors initially gravitated toward ETFs for their intraday trading capabilities, lower expense ratios, and commission-free trading options, a deeper story has emerged: tax efficiency has become the primary driver of this massive migration, particularly for long-term taxable investors.
For decades, mutual fund flows have been a workhorse variable for understanding investor behavior, market sentiment, and price impact. But what if the way we measure them distorts the story?
When inflation rises, trading behavior changes in systematic ways: liquidity deteriorates, bid-ask spreads widen, and investors trade less on fundamentals and more on short-term noise.
The size effect is alive and well, but it's more nuanced than we once thought. Rather than viewing it as a simple "small beats large" phenomenon, we should understand size as a critical dimension that shapes how effectively other investment factors perform.
On April 2nd, President Donald Trump announced sweeping tariffs against nearly every foreign economy. A blanket 10% tariff applied to all imports, even from places like the Heard and McDonald Islands, which have no permanent residents, and up to 50% for specific countries like Lesotho, Cambodia, and Vietnam. The reaction was immediate. Stocks cratered, risk assets sold off, and confidence evaporated almost overnight. Why such a sharp response? Tariffs themselves aren’t new; countries use them all the time. But this felt different, and for investors, it raised an unsettling question: was this another 2020-style shock in the making, or just a temporary scare?
This paper reviews early evidence that algorithms can read GP reports, forecast cash flows, and benchmark funds. But it also shows where the limits lie.
Can machine learning techniques improve the prediction of cross-sectional factor returns in equity markets?
Today, machines are not only processing data but interpreting narratives, forecasting returns, and constructing investment theses once reserved for humans. This paper examines how AI is reshaping the role of the discretionary PM, arguing that the edge isn’t disappearing — it’s migrating.
Today, phrases like “HODL” and “buy the dip” have become rallying cries for equity investors. But is this mindset always correct? Could there come a time when buying dips or holding at all costs turns out to be a mistake? To dig deeper, let’s look at insights from Michael Mauboussin and Dan Callahan’s recent paper, Drawdowns & Recoveries: Base Rates for Bottoms and Bounces, and consider what the evidence tells us about the nature of drawdowns and recoveries.
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