Do factor portfolios survive transaction costs?
Factor investing, and the associated intellectual battles, have raged for decades in academic finance journals. However, now that factor investing has gone mainstream via ETFs, [...]
Academic Research Insight: How Women Affect Corporate Decision-Making
Shaped by their daughters: Executives, female socialization, and corporate social responsibility Henrik Cronqvist, Frank Yu A version of this paper can be found here Want to [...]
Academic Research Insight: Political Connections May Actually Increase SEC oversight
Do political connections help or hinder SEC oversight? Jonas Heese, Mozaffar Khan, Karthik Ramanna Journal of Accounting and Economics A version of this paper can be [...]
Monetary Momentum
On most mainstream finance websites, a good chunk of the stories discuss the FED and where interest rates are going. Intuitively, this makes sense: The [...]
Academic Research Insight: How to Balance Short and Long term Goals in Asset Allocation
Strategic Asset Allocation-Combining Science and Judgment to Balance Short Term and Long Term Goals Peng Wang and Jon Spinney A version of this paper can [...]
Factor Investors Beware: Positive SMB May Not Mean You Own Small-Caps
Regression analysis is used all the time to assess how a portfolio "loads" on certain factors. The most common factor loadings examined are the market, [...]
Do Trend-following Managed Futures Increase Safe Withdrawal Rates?
Andrew Miller, a regulator contributor to the blog, is passionate about the intersection of academic finance research and financial planning. We obviously love the academic [...]
Academic Research Insight: Being Surprised by the Unsurprising: Earnings Seasonality and Stock Returns
Are we misidentifying seasonal patterns as genuine earnings news? Tom Y. Change, Samuel M. Hartzmark, David H. Solomon, Eugene F. Soltes The Review of Financial [...]
Do Portfolio Factors or Characteristics Drive Expected Returns?
This article examines a somewhat overlooked, but important, discussion that raged among academic researchers on the source of the value investing premium in the late 1990s and early 2000s—the topic: factors vs characteristics.
Academic Research Insight: Sin Stocks May Earn a “Boycott” Risk Premium
Social Screens and Systematic Boycott Risk H. Arthur Luo and Ronald J. Balvers Journal of Financial and Quantitative Analysis A version of this paper can [...]
Factor Investing with Factor Expert Lu Zhang
Replicating Anomalies is arguably a "must-read" for anyone who thinks about factor investing and is looking to improve their understanding of the space. Lu Zhang, [...]
Takeaways from a Non-PHD who Powered Through a 144-page Factor Investing Paper
Wes recently challenged me with a unique proposition: Hey Ryan, read through this Replicating Anomalies paper and tell me what you think. Its a bit [...]
Academic Research Insight: Stick to the Fundamentals and Discover Your Industry Peers
Stick to the Fundamentals and Discover Your Peers Jean Overgaard Knudsen, Simon Kold and Thomas Plenborg A version of this paper can be found here Want [...]
A Potential Winner: Buying Lottery Stocks with Low Short Interest
Short Interest and Lottery Stocks Kelley Bergsma & Jitendra Tayal A version of this paper can be found here Want to read our short summaries of [...]
Trend-Following: A Deep Dive Into A Unique Risk Premium
Trend-following strategies have historically been laughed at via the modern academic finance research community. Having first-hand knowledge of that community, we can verify that academic [...]
A Fund Flows Theory for Value and Momentum Investing
Value and Momentum Investing -- our two favorite factors. We talk about these phenomena on our blog all the time, and have given both rational and behavioral explanations as to why these may occur. However, very few in the finance community are direct investors into Value and Momentum securities -- the individual stocks (or bonds) themselves. Many use ETFs or mutual funds to gain access to these factors. Institutions generally do the same, either investing in hedge funds or managed accounts. This is delegated asset management, whereby one delegates the decision of the security selection onto a third-party manager. A by-product of delegation is that from time to time, the third-party manager must be assessed. While many may claim the process is most important, the performance is always taken into consideration. So what happens to a Value manager who is overweight the wrong industry? While the manager may be following the same process discussed ex-ante, the ex-post assessment may be that the manager needs to be fired due to underperformance.
Academic Research Insight: Sentiment Feedback Strength Trading Strategy
Genetic programming optimization for a sentiment feedback strength based trading strategy Steve Y.Yang, Sheung Yin Kevin Mo, AnqiLiu, Andrei A.Kirilenko A version of this paper [...]
Replicating Anomalies
Academic research is amazing and incredibly useful for helping us better understand the complex world in which we live. In fact, academic research has literally [...]
Dividend Capture Strategy: Trade Execution Matters
One area in investing that is often overlooked by investors is trade execution, which relates primarily to commissions, bid-ask spreads, and price impact. Yet sometimes [...]
529 Plan Distribution Flowchart
I recently had a conversation with a client who had a big fat 529 plan and was planning to take a distribution from it to [...]