Do Investment Consultants’ Recommendations Add Value? Nope.
Just got done perusing the latest issue of the Journal of Finance . As is the typical case, 50% of the articles can be read if [...]
Value investing is quite possibly the worst idea…EVER
n short, value investing the past few years has been a bad experience, but things can get a lot worse before they can get better. Sadly, this is the lot of the value investor. Value investing is really a tragic story of pain, anguish, and heartbreak that never really has a happy ending. The expected gains are almost always offset with extreme relative performance pain.
The Expensive Lesson of Closet Indexing: Avoid Low Active Share and High Expenses
The promise of active investing is compelling: the opportunity to earn higher risk-adjusted returns! And paying a fee to an active manager--who is doing something unique--can make sense. And [...]
Is momentum investing dead? Or is it just painful?
Sometimes even the best evidence-based active investment strategies can create a formidable challenge to investors seeking to exploit them. Case in point -- momentum investing. [...]
When Academics Disagree on Momentum Investing
The academic standard for intermediate-term momentum measurement is "12_2 momentum:" simply sort all stocks based on a stock's total return over the past twelve months, ignoring [...]
Time Series Momentum and Volatility Scaling
There is a new paper published in the Journal of Financial Markets that digs a bit deeper into the Moskowitz, Ooi, and Pedersen "Time Series [...]
Managed Futures: Understanding a Misunderstood Diversification Tool.
In my two previous blog posts (here and here), I analyze the performance of bonds during really bad months for US stocks (“Crisis Alpha” months), [...]
Optimizing Mean Variance Optimization
In the 1950s, Harry Markowitz proposed a method to identify the optimal trade-off between risk and return for a portfolio. The theory is broadly termed, "Mean-Variance Optimization [...]
Dealing with Delistings: A Critical Aspect for Stock-Selection Research
Eric Crittenden was recently on Meb Faber's podcast and he tells a compelling story about the perils of survivor bias in backtesting. Eric's story begins when [...]
Surprise! The Size, Value, and Momentum Anomalies Survive After Trading Costs
Anyone who has spent time reading this blog has become familiar with research involving asset pricing anomalies that generate excess returns. In particular, the academic [...]
Asset Pricing with–and without–garbage.
If you are into consumption-based asset pricing theory and the associated empirical attempts to reconcile the theory with the data from the realized equity premium, garbage is a [...]
Taming the Momentum Investing Roller Coaster: Fact or Fiction?
Intermediate-Term Price momentum, originally researched by Jegadeesh and Titman in 1993, documented a how recent stock returns tended to continue in the future. Stocks that [...]
Can Investors Replicate the Dorsey Wright Focus 5 ETF Strategy?
A long-time reader asked that we examine the performance and process associated with the Dorsey Wright Focus Five ETF (ticker: FV). For those who are unfamiliar [...]
Fine Wine is a Fine Addition to Your Investment Portfolio
Here we are in August, a great time to drink--and think--about wine. Of course, as a research-focused finance blog, our angle on wine is a [...]
Evidence-Based Investing Requires Less Religion and More Reason
Technical Analysis: The Market’s Oldest Religion During the 1600s, the Dutch had a large merchant fleet and the port city of Amsterdam was a dominant [...]
Beware of institutional ownership data from 13F filings!
The core source for institutional ownership data is derived from 13F filings, from a form filed by large asset managers that manage over $100mm in [...]
Stale Performance Chasing: Beware of Horizon Effects
Investors talk a big game when describing how they evaluate mutual funds. They say they consider things like the objectives of the fund, its size, and [...]
Style Momentum in Australia?
Jegadeesh and Titman (1993) popularized a simple idea: "past winners outperform past losers." Post JT, the relative strength, or "momentum anomaly," was forever ingrained in [...]
The Folly of Stock Market Forecasting
The idea that one can predict stock market movements is somewhat insane. The major problem with stock market forecasting is the lack of evidence that it [...]
Behavioral Finance Must See: Thaler’s 2016 Presidential Address
This is a great video to watch over the holiday weekend. Prof. Thaler does a great job walking through behavioral finance/economics. He also has a [...]