How Smart are “Smart Beta” ETFs?
Many consider smart beta to be a revolution in the asset management industry. For example, Bloomberg ran an article, "Funds Run by Robots Now Accounts for $400 [...]
International Value Investing: Looks Like a Reasonable Bet
A Value Investing Premium, Everywhere? A rich body of literature has shown that value investing, or buying stocks that are "cheap" based on a variety of valuation [...]
The Most Important Decision When Selecting a Value Investing Fund
The Best Investment with the Worst Performance We are huge believers in value investing. I personally started off as a fundamental value guy, spending twenty-plus [...]
Momentum Investing: A Simple Bond Momentum Strategy
Quick Summary For a bond momentum strategy, it makes sense to select the top 3 or top 6 funds.The starting universe matters.One must consider the taxes and [...]
Are Value Investing and Momentum Investing Robust Anomalies?
Beating a Dead Horse: Value investing and momentum investing work At this stage in our lives we've essentially memorized the CRSP/Compustat database. Name an anomaly and [...]
Attention Value Investors: How to Predict Accounting Trickery
Predicting Material Accounting Misstatements Dechow, Ge, Larson and Sloan A version of the paper can be found here. Want a summary of academic papers with alpha? [...]
Top 10 Bank Lobbyist Rebuttals to Fiduciary Standard
It's tough being a Wall Street Financial Advisor these days... On April 14th, Department of Labor (DOL) Secretary Tom Perez issued a press release outlining the DOL's [...]
Sports Analytics: Remember, Statistics aren’t Perfect!
We came across an interesting article in the Wharton Magazine blog titled "The Dangerous Data Fetishes of Sports Analytics" by Ian Cooper. The main point of [...]
Tactical Asset Allocation with Market Valuations: Magic of Myth?
Executive Summary Although it has been very difficult to overcome our initial skepticism, we've finally accepted the notion that simple technical analysis may serve as [...]
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 [...]