A common question asked in the factor investing field is the following -- "how much of the model's performance is driven by sector allocations, and how much is driven by security selection?" Our answer is to simply buy Value stocks or Momentum stocks, regardless of sector constraints. Why? Well a nice anecdote (but not data) is that investing in "cheap" technology stocks was not a great idea in the internet bubble crash.
Our Global Value Momentum Trend Index ("GVMT" or "GVMT Index") is a globally diversified equity strategy that leverages trend-following to manage tail-risks. The strategy can [...]
One of the great debates in finance is whether the source of the value premium is risk-based or a behavioral anomaly. In our book, “Your [...]
The Oracle of Omaha just commented on the Chinese stock market in this year's Berkshire's annual meeting: ...Markets have a casino characteristic that has a [...]
A paper, "Facts about Formulaic Value Investing," is making the rounds and professes to plunge a dagger directly into the heart of systematic value investors. Half [...]
Value and Momentum investing have been studied across many different markets and asset classes (Asness et al 2013) and have shown to be effective factors. [...]
We've talked extensively about the concepts of active share and active fee, which aren't flawless metrics, but they have elevated the discussion around identifying and [...]
A few years ago, the profitability "quality" factor was originally proposed by Robert Novy-Marx. Here is a snippet from the abstract of the paper: Profitability, [...]
One of the popular investing truisms is the following (inspired by Bill Sharpe): For somebody to beat the market (win) someone else has to lag [...]
Who is the greatest stock picker of all time? Many investors' knee-jerk reaction is Warren Buffett. Understandable response, but is that the answer? Maybe not... So who [...]
Albert Einstein is reported to have said the following: The more I learn, the more I realize how much I don’t know. We can relate. [...]
January is here again and market commentators are already telling stories about the so-called January Effect. Some articles (examples here and here) are saying the [...]
Active investing sounds so easy. But we all know it is extremely difficult. Ask any deep value investor how they have felt over the past [...]
At Alpha Architect, we are big fans of Value investing (and Momentum). In the past, Wes and I examined which valuation measure had the largest spread [...]
A sophisticated DFA-focused advisor asked us to conduct some research on the following question: Are there additional portfolio diversification benefits to combining concentrated portfolios of value and [...]
Investing can perhaps be best learned through a combination of applied practice and continuous study. While there is no substitute for real-world experience and the [...]
A couple of weeks ago, I received Franklin Templeton Investments' letter to shareholders of Franklin Limited Duration Trust (ticker FTF) imploring us to not let "self-serving" Saba [...]
The dot-com bubble of the late 90s was a wild time in the stock market. Internet stocks were trading through the roof, tech IPOs were [...]
n short, value investing the past few years has been a bad experience, but things can get a lot worse before they can get better. Sadly, this is the lot of the value investor. Value investing is really a tragic story of pain, anguish, and heartbreak that never really has a happy ending. The expected gains are almost always offset with extreme relative performance pain.
Anyone who has spent time reading this blog has become familiar with research involving asset pricing anomalies that generate excess returns. In particular, the academic [...]
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