Sobering 10-Year Market Predictions from CFOs
The Graham-Harvey survey is complete and the expectations of CFOs are available for review. As the figure below highlights, expected returns on the S&P 500 [...]
Using Profitability as a Factor? Perhaps You Should Think Twice…
Many investors are getting excited about the so-called "profitability factor," originally posed by Novy-Marx (here is an alternative story) . Larry Swedroe has a high-level piece [...]
Behavioral Finance: Part Behavior, Part Market Frictions
The baseline theory for understanding asset prices is the Efficient Market Hypothesis (the “EMH”), pioneered by Eugene Fama. Of particular interest is semi-strong market efficiency, which [...]
Daily Academic Alpha: Facts and Fantasies in Commodities
Facts and Fantasies About Commodity Futures Ten Years Later Gorton and Rouwenhorst (2006) examined commodity futures returns over the period July 1959 to December 2004 [...]
Value Investing in a Honda Civic–and proud of it…
Last week I had the privilege of being on CNBC to talk about value investing. A big shout out to Josh Brown, who introduced me [...]
Basic Factor Analysis: Simple Tools to Understand What Drives Performance
Investors should know what they are buying and why they are buying it. Unfortunately, more often than not, investment products are jammed down the throats [...]
Daily Academic Alpha: High Lobby Efforts Equal Alpha?
Corporate Lobbying and Firm Performance Corporate lobbying activities are designed to influence legislators, regulators and courts, presumably to encourage favorable policies and/or outcomes. In dollar [...]
From the Frontlines to Finance: How the Marines Shaped Our Investment Philosophy
Serving in the Marine Corps was an unforgettable experience. Civilians often tell us “thank you for your service”; however, the real “thanks” is due to the Corps for giving us valuable life lessons. The not-so subtle teachings bestowed upon us by heavily muscled, insanely aggressive Marine Corps Drill Sergeants are still, literally, ringing in our ears: “Listen here, pond scum, you better run faster, shoot straighter, and decide quicker if you are going to win in battle!” Years later, we would test that theory in real-time, battling insurgents in Iraq. As we trade in our flak jackets for laptops and neckties, the lessons learned in combat and are not only relevant, but vital on the battlefield of high finance. Four core lessons apply to frontlines and finance: Humans Are Emotional: Systematic processes beat behavioral bias; Rambo isn't Realistic: Act based on evidence, not on stories; Complacency Kills: Focus on fundamentals and never stop learning; Integrity is Everything: Do things right and do the right thing.
Where are the Cheap High Quality Value Stocks?
Here is a snapshot of a model portfolio built on the Quantitative Value philosophy. Note: we exclude financials in our analysis, so by construction they have [...]
Tactical Asset Allocation: Beware of Geeks Bearing Formulas
How Should I Tactically Allocate my Assets? A lot of investors ask this question as their wealth grows and the number of financial products grows exponentially. [...]
What Drives the S&P 500 Equal-Weight Return Premium?
A recent academic paper, Equal or Value Weighting? Implications for Asset-Pricing Tests, highlights two methods of weighting: Equal-weight and Value weight. As the paper states: With monthly rebalancing, an equal-weighted [...]
Performance Attribution for Active ETFs and Active Mutual Funds
Peter Hecht, Ph.D., a fellow Chicago Finance PhD, and vice president of Evanston Capital Management, recently posted an article introducing a practical solution for active portfolios return attribution: [...]
Currency Investing Research: Good Carry, Bad Carry
Good Carry, Bad Carry Bekaert and Panayotov A version of the paper can be found here. Want a summary of academic papers with alpha? Check out [...]
Book Review – Competition Demystified: a Radically Simplified Approach to Business Strategy
We've spent a lot of time these days thinking about how to identify economic moat, or a firm's ability to defend against competitive forces in [...]
Momentum Investing: Skewness-enhanced Momentum Yields Double Alpha
Expected Skewness and Momentum Jacobs, Regele and Weber A version of the paper can be found here. Want a summary of academic papers with alpha? Check [...]
Value Investing Research: Simple Methods to Improve the Piotroski F-Score
Executive Summary In this article, we identify how we can improve the performance of the F-Score and enhance a generic value investing approach. In a [...]
Daily Academic Alpha: Credit Spreads and Stock Returns
The Term Structure of Credit Spreads and the Cross-Section of Stock Returns We explore the link between credit and equity markets by considering the informational [...]
A Unique Insider Trading Signal that Generates Alpha
Insider Trading Patterns Cicero and Wintoki A version of the paper can be found here. Want a summary of academic papers with alpha? Check out our Academic [...]
Is Passive Perfect? High Active Share Long-Term Investing Works Better
Patient Capital Outperformance Cremers and Pareek A version of the paper can be found here. Want a summary of academic papers with alpha? Check out our Academic [...]
Traders, Guns, and Money
Traders, Guns, and Money Gopal and Greenwood A version of the paper can be found here. Want a summary of academic papers with alpha? Check out [...]