All firms can benefit from the positive influence of women
Marisa Mayer’s recent announcement that she is again pregnant, and does not plan to take maternity leave after her twins arrive, has once again raised [...]
Which Asset Allocation Weights Work the Best?
What is the optimal method to weigh an index? Everyone seems to have a story these days for the "best" way to weigh an index. In this study we look at simple ways to weigh a large-cap stock index using prices only. Bottom-line up front: Low volatility worked the best on a risk-adjusted basis over the past 87 years. However, low volatility, was close followed by momentum, equal-weighting, and value-weighting, respectively. Across the board, results are similar.
How to Pick Smart Beta ETFs
Investors are probably unaware of the price they are paying for the "active" piece of Smart Beta. Using a simple framework, we show that buying a Smart Beta product at 45bps is equivalent to paying 5bps for a generic passive exposure and 138.33 bps for the active exposure! How many investors are aware that "low-cost" smart beta products might be implicitly charging fees that are equivalent to many active mutual fund fees?
Turn Off Your Chief Economist: GDP Growth Doesn’t Predict Stock Returns
In a sustained effort to try too hard, investors are constantly analyzing and assessing the growth rates of various markets around the world. The key [...]
Insider Trading During the 8-K Trading Gap
SEC rules allow companies to delay the public disclosure of significant corporate events for up to 4 business days. This information is reported on an [...]
Ben Graham Would be Proud: Fundamental Analysis Works
Here is an interesting working paper on the use of fundamental analysis in stock selection. The authors take a dynamic regression "machine learning-esque" approach to building [...]
Cliff Asness Quick Hits: Smart Beta and Risk Parity
Cliff Asness gave a talk at The Bloomberg Markets Most Influential Summit a few weeks ago, and offered up some discussion of recent market developments, [...]
Absolute Strength Momentum Investing Strategy
Here we highlight an interesting working paper titled "Absolute Strength: Exploring Momentum in Stock Returns" by Gulen and Petkova (2015). The abstract is the following: [...]
Value Investing: The Pain Train has Arrived and it Sucks.
A few months ago we highlighted a surprising result: cheap high-quality stocks were getting crushed by expensive junk stocks. The spread at the end of [...]
Daily Academic Alpha: Momentum Investing and Asset Allocation
The results in this paper won't surprise most who are regular readers, but the paper below does a nice job explaining things in a simple [...]
Commodity Investing 101: Basic Insights Most Advisors Don’t Know
Unlike equity and bond investing, investing in commodities is a less familiar undertaking for many. Commodities behave differently than stocks and bonds, pose different risks, [...]
How Do Dividend Paying Stocks Affect the Value Investing Anomaly?
Meb Faber tweeted an interesting question related to taxes, dividend payers, and the value premium the other day. I'll summarize the heart of the question: How do dividend [...]
How to Use Factor Funds in a Diversified Portfolio
Active management has been out of favor for a while--high fees, high tax burdens, and poor long-term performance. But with the slow rise of actively [...]
Combining volatility, momentum, and trend in asset allocation
The Effective Combination of Risk-Based Strategies with Momentum and Trend Following Gregory Guilmin A version of the paper can be found here. Want a summary of [...]
Value and Momentum in Sports Betting
As noted through our previous posts, we are big proponents of Value investing and Momentum investing strategies. We even highlight the best way to combine [...]
Global 60/40 versus Domestic 60/40
The Harvard Management Company report was recently released here. h.t. Tom for pointing out. The biggest surprise was the spread in returns between the global 60/40 [...]
New Evidence: Simple Forecasts Beat Complex Forecasts
Always seek to simplify. Occam’s razor teaches us we should cut away any extraneous factors that are unnecessary to explain something. Stated another way, we [...]
The Active Share Debate: AQR versus the Academics
There is an interesting discussion in the geeky world of academic finance literature between the intellectual muscle at AQR and academia. The discussion revolves around [...]
Can Investors Achieve Commodity Exposure via Equities?
This past year we examined the possibility of replicating commodity exposure via equities. The project was spurred by an insightful research report from MSCI, which showed some [...]
Buffett On Economic Moats
In 2007, Warren Buffett gave an extended talk to a group of MBA students at the University of Florida. During it, Buffett spends some time talking [...]