Value Investing Research

//Value Investing Research

Value Investing

Tactical Asset Allocation with Market Valuations: Magic of Myth?

By | 2017-08-18T16:56:18+00:00 April 14th, 2015|Research Insights, Value Investing Research, Tactical Asset Allocation Research, $SPY, $vlue|

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 an effective way to manage risk and to time markets. [...]

How to Combine Value and Momentum Investing Strategies

By | 2017-08-18T17:03:25+00:00 March 26th, 2015|Key Research, Value Investing Research, Momentum Investing Research, $SPY, $mtum, $vlue, $voo|

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.

Investing in High Dividend Yield Stocks: a Sucker Bet? Maybe Not This Time Around

By | 2017-08-18T17:01:44+00:00 March 24th, 2015|$dtd, Value Investing Research, Yahoo Tickers|

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 salivate, marketing-focused asset managers leverage this knowledge to sell unsuspecting [...]

How Rebalancing Frequency Affects Quality and Value investing funds

By | 2017-08-18T17:03:33+00:00 March 19th, 2015|Value Investing Research, $vlue, $voo|

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 findings: Value portfolios outperform the market, historically. Quality portfolios perform inline [...]

Timing Value and Momentum with Valuation-Spreads

By | 2017-08-18T16:54:55+00:00 March 4th, 2015|Value Investing Research, Momentum Investing Research, Tactical Asset Allocation Research, $SPY, $mtum, $vlue|

We were recently passed along an article suggesting that valuation spreads, or the spread in a valuation metric across the most expensive and least expensive stocks, matters for timing investments. We take this concept one step further [...]

Market Valuations based on CAPE–A Deeper Dive

By | 2017-08-18T17:00:58+00:00 February 25th, 2015|Research Insights, Value Investing Research, Uncategorized, Tactical Asset Allocation Research, $SPY, $IEF|

We have discussed market valuations in the past, but the issue of market valuations was recently raised on CNBC, when Robert Shiller suggested he may shift out of the US and buy Europe. When Shiller speaks, we [...]

The Wrong Way to Pick Value Investing Funds

By | 2017-08-18T16:55:05+00:00 February 16th, 2015|Research Insights, Value Investing Research, $SPY|

US News laundry lists their top 10 "Value Investing Funds," or Value Investing ETFs, in their recent article: http://money.usnews.com/funds/etfs/rankings/value-funds The criteria (and weighting) for selecting so-called "Value" ETFs are outlined below: Expense Ratio (30%) Tracking Error [...]

Why Indexing and “Smart Beta” Are So Popular

By | 2017-08-18T16:52:11+00:00 January 22nd, 2015|Research Insights, Value Investing Research|

Asset Manager Contracts and Equilibrium Prices Buffa, Vayanos, and Woolley (2014) A version of the paper can be found here. Want a summary of academic papers with alpha? Check out our Academic Research Recap Category. Abstract: We [...]

How to Create a Tax-Efficient Hedge Fund

By | 2017-08-18T17:03:24+00:00 December 15th, 2014|Key Research, Value Investing Research|

The number of complex, optimized, and so-called "proprietary" value long/short strategies are too numerous to list. We've seen just about everything in our role as academics as well as consultants to an enormous family office. And of course, with fancy Manhattan offices, comes high fees, no transparency, and low liquidity (lockups). You'll also get great stories that are often backed by little to no empirical evidence. As we have shown before, trying to short expensive stocks is not a great idea! We think a simple solution to an investor's long/short equity woes is to focus on buying the cheapest, highest quality value stocks, and dynamically hedging the market risk with an S&P 500 futures (both the constant and dynamic hedge). Savvy investors can implement the solution we've proposed: buy a basket of the cheapest, highest quality value stocks and negate market risk with tax-efficient low-cost equity futures. And if you are simply too overwhelmed by portfolio management, we can implement the QVAR solution at a costs that is more affordable than the average long/short hedge fund offerings--especially on an AFTER-TAX BASIS!

Shareholder Yield: Do longer-term calculations enhance performance?

By | 2017-08-18T16:57:03+00:00 June 16th, 2014|Research Insights, Value Investing Research|

Wes and I have a recent paper (found here) which examines a more complete measure of shareholder yield (dividends, net stock repurchases, and debt reduction). Here is the abstract: High-dividend-yield stocks do not reliably earn above-average [...]

Value Investing: Digging Manager Graveyards Since 1963.

By | 2017-08-18T16:53:46+00:00 December 12th, 2014|Research Insights, Value Investing Research|

Following value strategies can be hazardous to one's wealth in the short run. Oil stocks are a great example of the challenge value investors face: The stocks are down big--and getting cheaper--but could go down even further! [...]

Oil Stocks: A Real-Time Case Study in Value Investing

By | 2017-08-18T16:59:44+00:00 December 11th, 2014|Research Insights, Value Investing Research, Uncategorized|

I just took a snapshot of the front page of Yahoo Finance, CNBC.com, and Bloomberg.com:   Bloomberg.com @ 1725 EST CNBC.com @ 1725 EST Finance.Yahoo.com @ 1725 EST WHO [...]

Mission Impossible: Beating the Market Forever

By | 2017-08-18T17:00:48+00:00 November 18th, 2014|Research Insights, Key Research, Value Investing Research|

A quick glance at the most recent Berkshire Hathaway annual report (PDF) highlights an amazing data point: Warren Buffett has compounded at 19.7% a year from 1965 through 2013; the S&P 500 Total Return Index has compounded at 9.8% a year from 1965 through 2013. The immediate reaction to these figures is predictable: “Warren Buffett is an investing god, so we should buy Berkshire Hathaway and throw away the keys.” The gut reaction is that Buffett can continue to beat the market forever. Unfortunately, as this post highlights, this is an impossible feat.

Quantitative Value Research: NCAV/MV Factor

By | 2017-08-18T16:58:14+00:00 November 15th, 2014|Research Insights, Value Investing Research|

Testing Benjamin Graham's Net Current Asset Value Strategy in London Xiao and Arnold A version of the paper can be found here. Want a summary of academic papers with alpha? Check out our Academic Research Recap Category. [...]

Quantitative Value Research: Long-term P/E Ratio

By | 2017-08-18T16:58:15+00:00 November 10th, 2014|Research Insights, Value Investing Research|

The Long-Term Price-Earnings Ratio Anderson and Brooks A version of the paper can be found here. Want a summary of academic papers with alpha? Check out our Academic Research Recap Category. Abstract: The price-earnings effect has been [...]