Tactical Asset Allocation and Low Volatility Stocks
Investing in strategies that exploit the low volatility anomaly have grown in popularity in recent years. While low volatility based strategies may or may not [...]
Understanding How Broker Incentives Shape Financial Advice
Interactive Brokers recently posted a hilarious video, which highlights potential conflicts between advisers and investors. http://youtu.be/N2bHXn__EZM We transcribed the video below: [The scene: two [...]
Behavioral Finance Strikes Again: Anchoring in Loan Markets
Anchoring on Credit Spreads Dougal, Engelberg, Parsons, and Wesep A version of the paper can be found here. Want a summary of academic papers with alpha? [...]
Tax-Efficient Investment Strategies: How Should We Invest in Treasury Bonds?
We investigate various methods to express a 10-Year Treasury Bond allocation. The primary issue with Treasury Bonds is their lack of tax-efficiency. T-bond income (and [...]
Risk Management Rules on Australian Equities
A friend of the blog was inspired by our Robust Asset Allocation discussion, and conducted some backtests using our proposed risk management framework: 50% simple moving average [...]
Absolute Momentum and Stock Momentum Strategies: Friends, not enemies
There is sometimes confusion associated with so-called "momentum" strategies--we want to clear the muddy waters. We break momentum into two categories to differentiate between the different [...]
Low or High Inflation? Nope, Stealthy Government Debt Liquidation!
The Liquidation of Government Debt Carmen Reinhart and M. Belen Sbrancia A version of the paper can be found here A video of Prof. Reinhart [...]
How to Combine Value and Momentum Investing Strategies
The evidence suggests that we keep highly active exposures to value and momentum in their purest forms (assuming we are doing high-conviction non-watered down versions of the anomalies). Blending the strategy dilutes the benefit of value and momentum portfolios. The summary of the benefits of a pure value and a pure momentum approach can be summarized as follows: Easier ex-post assessment, stronger portfolio diversification benefits, and stronger expected performance.
Momentum Research: Main Embarrassment of the FF 3-Factor Model
Multifactor Explanations of Asset Pricing Anomalies Fama and French (1996) A version of the paper can be found here. Want a summary of academic papers with [...]
Investing in High Dividend Yield Stocks: a Sucker Bet? Maybe Not This Time Around
Beware of any investment that has the word, "yield," embedded in the title. This is especially important for "dividend yield" strategies. Because the term makes investors [...]
Individual Investors and the Moving Average Rule
Trading on Noise: Moving Average Trading Heuristics and Private Investors Etheber, Hackethal and Meyer A version of the paper can be found here. Want a summary [...]
Daily Academic Alpha: Higher Moments in Hedge Funds
Higher‐Moment Risk Exposures in Hedge Funds This paper singles out the key roles of US equity skewness and kurtosis in the hedge fund return generating [...]
Barron’s Advisors Summit. Scottsdale, AZ. Give us a Shout!
Patrick and I will be at the event in Scottsdale, AZ next Monday March 23 --March 25. If you wanna drink a beer with a [...]
How Rebalancing Frequency Affects Quality and Value investing funds
Rebalance frequency affects value and quality factors in different ways: Value works better when assessed more frequently Quality factors work about the same, regardless of frequently. Other important [...]
Market Valuation Metrics: Where Do We Stand?
We recently examined a handful of metrics related to S&P 500 valuations. P/E P/B TEV/EBITDA TEV/FCF TEV/GP Details on these metrics can be found here. [...]
Appraisal Arbitrage — A Tool of Evil Hedge Funds or a Benefit to Society?
The Wharton Blog Network recently posted a great piece by Maurice Lefkort on Appraisal Arbitrage, an esoteric area of finance in which legal rules that [...]
Daily Academic Alpha: Sham Strategy or Accounting Alpha?
What Is behind the Asset Growth and Investment Growth Anomalies? Existing studies show that firm asset and investment growth predict cross-sectional stock returns. Firms that [...]
Trusting an Advisor Costs Big Money, but Lowers Stress
Money Doctors Gennaioli, Shleifer, and Vishny (2015) A version of the paper can be found here. Want a summary of academic papers with alpha? Check out our Academic [...]
Daily Academic Alpha: Factors Abroad
Interaction of Size and Momentum Effects in Jordan Firms: 2005-2014 This study sought to disentangle the effects of size and whether there are size and [...]
Daily Academic Alpha: Public Actors
Public Actors in Private Markets: Toward a Developmental Finance State The nation's recent financial crisis brought into sharp relief fundamental questions concerning the social function [...]