ETF Product Development: Past, Present, and Future
On October 1st, 1908 Henry Ford introduced the Model T to the world. The power of the Model T was that it democratized the automobile [...]
Academic Research Insight: VOLATILITY WISDOM OF SOCIAL MEDIA CROWDS
Title: VOLATILITY WISDOM OF SOCIAL MEDIA CROWDS Authors: Ahmet K. Karagozoglu and Frank J. Fabozzi Publication: Journal of Portfolio Management, Winter 2017 [...]
Assessing the Potential Market Impact of Passive, Short-volatility, and Low-volatility Strategies
The market has recently experienced record low levels of realized volatility and the VIX™ (volatility index) has fallen to historic lows. Moreover, the incredibly popular [...]
Machine Learning for Investors: A Primer
If you are out to describe the truth, leave elegance to the tailor. — Albert Einstein Machine learning is everywhere now, from self-driving cars to [...]
Academic Research Insight: Does Past Performance Matter in Investment Manager Selection?
Title: DOES PAST PERFORMANCE MATTER IN INVESTMENT MANAGER SELECTION? Authors: BRADFORD CORNELL, JASON HSU, and DAVID NANIGIAN Publication: JOURNAL OF PORTFOLIO MANAGEMENT, SUMMER 2017 (paper ) What are [...]
Factor Timing Investigation: Interest Rates, Value Spreads, and Factor Premiums
Now that the Federal Reserve has begun the process of raising interest rates, and has announced their intention to begin to unwind their policy of [...]
Academic Research Insight: Does Gender Matter on Wall Street?
Title: GENDER AND CONNECTIONS AMONG WALL STREET ANALYSTS Authors: LILY FANG AND STERLING HUANG Publication: THE REVIEW OF FINANCIAL STUDIES, V.30, SEPTEMBER 2017 (version here) What are the [...]
Ben Graham on Passive Investing
The passive investing revolution is truly upon us. Ever since 1975, when Jack Bogle introduced the first index mutual fund, passive indexing has marched on [...]
What Happens When you Data Mine 2 million Fundamental Quant Strategies
As we have mentioned before, here, here and here, there is overwhelming evidence that the number of stock anomalies in the universe is much lower than [...]
Support Academic Research by Filling Out The Financial Analysts Survey
Prof. Richard Price, an old friend, co-author, and Alpha Architect advisory board member, is working on some cool new co-authored research that requires audience participation! [...]
Academic Research Insight: Do Dividends Still Matter?
Title: WHAT DIFFERENCE DO DIVIDENDS MAKE? Authors: C. Mitchell Conover, CFA, CIPM, Gerald R. Jensen, CFA and Marc W. Simpson, CFA Publication: Financial Analysts Journal, [...]
Trend-Following with Valeriy Zakamulin: Trading in Various Financial Markets (Part 8)
In our final blog post, that finishes the trend-following series, we briefly review the results of the forward-tests of the profitability of various trend following [...]
How ETF Trading Works: A Deep Dive Into ETF Market Making
Many in the financial service industry are now using ETFs to build portfolios. Some love the tax-efficiency of ETFs relative to mutual funds, while others use [...]
Academic Research Insight: Does one size retail financial advice fits all?
Title: RETAIL FINANCIAL ADVICE: DOES ONE SIZE FITS ALL? Authors: FOERSTER S., LINNAINMAA J.T., MELZER B.T., PREVITERO A. Publication: JOURNAL OF FINANCE, V.72, AUGUST 2017 (version here ) What [...]
Trend-Following with Valeriy Zakamulin: Trading the S&P 500 Index (Part 7)
The Standard and Poor's (S&P) 500 index is a value-weighted stock index based on the market capitalizations of 500 large companies in the US. This [...]
Short Term Momentum and Long Term Reversals Can Coexist
In their seminal 1993 paper, “Returns to Buying Winners and Selling Losers: Implications for Stock Market Efficiency,” Narasimhan Jegadeesh and Sheridan Titman reported significant returns [...]
Academic Research Insight: Global Equities and Overreaction
Title: OVERREACTION AND THE CROSS-SECTION OF RETURNS: INTERNATIONAL EVIDENCE Authors: Douglas W. Blackburn, Nusret Cakici Publication: Journal of Empirical Finance 42 (2017) 1-14 https://ssrn.com/abstract=2800188 What [...]
Trend-Following: Testing the Profitability of Trading Rules (Part 6)
The difficulty in testing the profitability of trend-following rules stems from the fact that the procedure of testing involves either a single- or multi-variable optimization. [...]
Portfolio Allocations using Enterprise Multiples (and others)
A common question asked in the factor investing field is the following -- "how much of the model's performance is driven by sector allocations, and how much is driven by security selection?" Our answer is to simply buy Value stocks or Momentum stocks, regardless of sector constraints. Why? Well a nice anecdote (but not data) is that investing in "cheap" technology stocks was not a great idea in the internet bubble crash.
Academic Research Insight: Abusing ETFs
Title: ABUSING ETFs Authors: UTPAL BHATTACHARYA, BENJAMIN LOOS, STEFFEN MEYER, ANDREAS HACKETAL Publication: REVIEW OF FINANCE, VOL.21, 2017 (version here) What are the research questions? [...]