The Size Effect in Multifactor Portfolios
The lack of a statistically significant size premium in the U.S. since the publication of Rolf Banz’s 1981 paper, “The Relationship Between Return and Market [...]
Cheap vs. Expensive Factors: Does Valuation Matter for Future Returns?
Tesla (TSLA) breached the $100 billion market capitalization in January 2020 and became the most valuable car manufacturer globally. However, valuing the company is challenging [...]
Why Passively Investing in Active Methods May Not Work.
Are Passive Investing Techniques Efficient for Active Strategies? David BlitzJournal of Portfolio ManagementA version of this paper can be found hereWant to read our summaries of [...]
DIY Asset Allocation Weights: May 2020
Do-It-Yourself tactical asset allocation weights for the Robust Asset Allocation Index are posted here. (Note: free registration required) Request a free account here if you [...]
What’s the Story Behind EBIT/TEV?
A common question we receive at Alpha Architect is the following: "Why do you focus on EBIT/TEV as a value screen for stocks instead of [...]
Ways to Measure Extreme Downside Risk
Richard D.F. Harris , Linh H. Nguyen and Evarist Stoja Journal of International Financial Markets, Institutions, and Money, 2019A version of this paper can be [...]
Trend Following is Everywhere
Similar to some better-known factors, such as size and value, time-series momentum (TSMOM) historically has demonstrated abnormal excess returns. For the less familiar with trend [...]
How to Compute Active Share
In the short video below, I show how to compute Active Share. The accompanying excel file with the formulas can be found here. I start [...]
Estimating Pandemic Economic Costs for “Face-to-Face” Businesses
Business disruptions from social distancing Miklós Koren and Rita PetoCovid Economics, Center for Economic Policy ResearchA version of this paper can be found hereWant to read [...]
Dividends, Stock Prices, and Inflation.
Building on the concepts presented in my Dividends Are Different article, here we present data and observations highlighting the relationship between inflation and 1) company [...]
Attention Data Geeks: Our Factor Investing Data Library is Open
Are you doing independent factor research? Have you spent countless hours on Ken French's website? Do you run factor regressions for "fun"? Congrats -- you [...]
Is There a Tail Risk Premium in Stocks?
It has been well documented both that stock returns have much fatter tails than a normal distribution would generate, and that tail events occur much [...]
How Cheap (or Expensive) Are Value Stocks?
What are the two most annoying words in forecasting? IT DEPENDS. In this piece we look at the "value" of value, which has been beaten [...]
Trend Following Reality: You Need Trends to Trend-Follow
You Can't Always Trend When You Want Abhilash Babu, Brendan Hoffman, Ari Levine, Yao Hua Ooi, Sarah Schroeder and Erik Stamelos The Journal of Portfolio Management, March 2020A version of this [...]
Compound Your Knowledge Ep 28: Bond ETF discussion with Jon Seed
In mid-February, prior to the market craziness, Jon Seed posted an article on our site titled: “Price”, ETFs, and Bond Market Liquidity. This was a [...]
The Economic Consequences of Pandemics: A Guide from History
Pandemics: Long-Run Effects Òscar Jordà, Sanjay R. Singh, Alan M. TaylorCEPR PressA version of this paper can be found here Want to read our summaries of academic finance [...]
Daily vs. Monthly Trend-Following Rules…Plus Some DIY Tools!
Trend-following strategies are a lot like stock-picking strategies -- there are endless approaches and varying levels of complexity. In this short piece, we explore the [...]
Volatility, Risk Management, and Market Chaos: Research that Might Help
Given the recent market decline, we thought it would be helpful to review some of our blog posts from the past that may be relevant [...]
Pandemics and Factor Investing: A Glimpse into the Past
Equity Styles and the Spanish Flu Guido Baltussen, Pim van VlietA version of this paper can be found hereWant to read our summaries of academic finance [...]
Volatility Expectations and Returns
A large body of research, including the 2017 study “Tail Risk Mitigation with Managed Volatility Strategies” by Anna Dreyer and Stefan Hubrich, demonstrates that while [...]