Alpha Architect

Factor Investors: Momentum is Everywhere

The Jegadeesh and Titman (1993) paper on momentum established that an equity trading strategy consisting of buying past winners and selling past losers, reliably produced risk-adjusted excess returns. The Jegadeesh results have been replicated in international markets and across asset classes. As this evidence challenged and contradicted widely accepted notions of weak-form market efficiency, the academic community took notice and started churning out research. As a result, a very large number of academic studies were published on momentum. The article summarized here has conveniently summarized 47 articles deemed as the highest quality and published in either the Journal of Finance, the Review of Financial Studies, or the Journal of Financial Economics, all three considered premier journals in the finance discipline. It is difficult to understate the importance of having a well-curated summary of momentum research. Keep it in your library.

Institutional Investing and Manager Forbearance

Forbearance is important and we argue that performance evaluation should be multifaceted, akin to a Bayesian decision-maker who conducts continued due diligence and updates beliefs about returns with process information.

The democratization of investing and the evolution of ETFs

The implications of the competitive landscape for ETFs are mixed. On one hand, they have truly democratized investing. Investors now have access to the benefits of financial markets in one instrument that provides diversification at very low fees. Recently advertised fees on broad-based bond funds have fallen to 3bps. On the other hand, ETF providers have been able to satisfy investor demand for increasingly specialized products even though the evidence suggests they underperform. Are investors becoming worse off due to the effectiveness of the marketing strategies by providers of specialized ETFs?

Geographic Investing and Company Operations

The article explores the limitations of traditional country-level stock market indexes that are constructed based on the domicile of issuing firms.

A New Wolf in Town? Pump-and-Dump Manipulation in Cryptocurrency Markets

Cryptocurrency and the various forms of infrastructure are currently in a stage of rapid innovation. If the manipulation embedded in PADs is widespread then the confidence in and integrity of the crypto market will suffer.

Trend Following and Momentum Turning Points

Trend follower nerd alert: This study is important because it offers a comprehensive analysis of TS momentum strategies, its unifying framework that links performance to underlying variables, and its practical implications for investors seeking to enhance their understanding of momentum investing and improve their portfolio performance.

Do Short-Term Factor Strategies Survive Transaction Costs?

Short term return anomalies are generally dismissed in the academic literature "because they seemingly do not survive after accounting for market frictions.” In this research, short term “factors” are taken seriously and the authors argue the standard parameters may not apply for short horizons.

The Determinants of Inflation

The findings from this Hidden Markov Model analysis provide policymakers with valuable insights into the nature and behavior of inflation regimes. This information can inform the design and implementation of monetary, fiscal, and regulatory policies to effectively manage inflation, stabilize the economy, and promote sustainable economic growth.

Evidence supporting factor-based seasonalities

Factor seasonality reflects its own stock-level equivalent. It is not an independent risk factor.

Flight to Safety in the Regional Bank Crisis of 2023

This article provides insights into the behavior of depositors and the role of large banks during a banking crisis, offering valuable implications for policymakers, regulators, and researchers in the field of banking and finance.

Investor demand, rating reform and equity returns

The traditional financial theory attributes security returns to market- or factor-based risk, with no role ascribed to other influences. In this research, the authors argue for including investor demand as an additional variable in explaining returns. Can changes in investor demand generate systematic changes in security returns?

Social Media and Inequality in Venture Capital Funding

The article aims to examine the role of social media in venture capital financing, its impact on disparities faced by underrepresented groups, and the mechanisms through which social media usage can facilitate venture capital funding.

Female execs bring more accuracy to analysts’ earnings forecasts

The results of this research extend the literature in a number of areas including: the analyst forecast literature; the literature on behavioral accounting and finance with respect to corporate decision-making all in the context of gender; and the dominant role of the CEO on information transparency.

Does investing in a more concentrated fund result in better performance?

This study explores the degree to which fund concentration (high tracking error) affects the magnitude of excess returns and whether or not the likelihood of outperformance or underperformance are distributed similarly.

Managerial Multitasking in the Mutual Fund Industry

The article aims to explore the relationship between multitasking and performance for mutual fund managers, investigate the potential mechanisms and factors influencing this relationship, and provide insights for fund companies and investors regarding the implications of multitasking on fund performance.

The Gender Gap Among Top Business Executives

The article aims to provide insights into the gender gaps in executive employment and compensation, explore the role of corporate culture and temporal flexibility in these gaps, and understand the factors influencing gender differences in entry, exit, and pay among top business executives.

Where Large Language Models and Finance Meet

BloombergGPT is a large language model (LLM) developed specifically for financial tasks. The authors trained the LLM on a large body of financial textual data, evaluated it on several financial language processing tasks and found it performed at a significantly higher level than several other state-of-the-art LLMs.

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Basilico and Johnsen

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