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 [...]
Backtesting strategies based on multiple signals — Beware of Overfitting Bias!
One of the dangers of being a quantitative investor is that when you see patterns in historical data you might wrongly assume they will repeat. Put [...]
Stock Market Anomalies and Baseball Cards
I still have a Ken Griffey Jr. Rookie Card. To be honest, I don't even know where the thing is, but I hope it is [...]
Leveraging Persuasion Science to Nudge Investors in a Better Direction
Making choices can be difficult, but possible alternatives can be arranged in a way that facilitates effective decision-making. This is the idea behind “choice architecture,” [...]
Digging Deeper into Adaptive Asset Allocation
In some ways, investing is simple. After all, we all want the same things. High returns. Low volatility. Small max drawdowns. Unfortunately, it's very difficult--if [...]
Invert, always invert: Will Stocks Diversify Bond Investments in the Future?
My last post, "Will bonds deliver crisis alpha in the next crisis?," created quite a stir on the blogosphere. The underlying assumption of the analysis is [...]
Want to Know the Secret to Inefficient Prices? Lazy Prices.
How do you handle repetitive tasks? If you're like most people, you work through a task in a variety of ways, find the most efficient approach, [...]
Will Bonds Deliver Crisis Alpha in the Next Crisis?
Bonds are often viewed as being great diversifiers due to the perception that they perform well during tough times for stocks. Historically this has been a [...]
Bubble Investing: Learning from History
We just wrote a piece for Forbes on financial bubbles in the lab. Punchline: investors initially underreact to fundamentals, then they overreact, and eventually prices correct. [...]
Want to spot a true Value Investor? Look for horrible recent performance
Harry Houdini is perhaps the best-known magician of all time, gaining notoriety in the early 20th century through his daring escape acts. Houdini escaped from straight [...]
BARRACKS CASH: A Military Guide to Better Saving and Spending
Foreword: Mark Cowett is an interesting character. He is a University of Chicago undergraduate with a BA in History as well as an MBA from [...]
Behavioral Finance Strikes Again: Contrast Effects in Financial Markets
At this point, even hard core efficient market fans will likely admit that behavior can influence investment decisions. Humans aren't robots. However, just because some investors exhibit bad behavior [...]