Text-Based Factor Investing
Part 1: The End of Accounting This is the first part of a series of guest posts by Kai Wu, the CIO & Founder of Sparkline Capital. The Factor Zoo As readers of Alpha Architect’s [...]
Market Timing Using Aggregate Equity Allocation Signals
When it comes to predicting long-term equity returns, several well-known indicators come to mind—for example, the CAPE ratio, Tobin’s Q, and Market Cap to GDP, to name a few. Yet there is another indicator without [...]
It Starts with Freedom
A few years ago, before launching our freedom-weighted emerging markets index, I was in a coffee shop where I overheard a group of students talking at the next table. They were anxious about an upcoming [...]
Trend-Following Filters – Part 3
Introduction This is the third article in a series of three, the first two are available here and here. Those articles focus on examining from a digital signal processing (DSP) perspectiveFor background information on DSP, [...]
Fixed Income when you’re Between a Rock and a Hard Place – Part 1/2
Figure 1: Investors are between a rock and a hard place.Source: Getty Images. Invesco. Investors are stuck between a rock and a hard place. On one hand, it is painful to buy bonds that deliver [...]
A Review of Ben Graham’s Famous Value Investing Strategy: “Net-Nets”
Benjamin Graham, often considered a strong candidate for "the father of quantitative value investing", developed an investment strategy that involved purchasing securities for less than their “current-asset value”, “a rough index of the liquidating value”. [...]
Trend-Following Filters: Part 1/2
1. Introduction Many traders use strategies based on trends that occur in stock, bond, currency, commodity, and other financial asset price time series in order to “buy low” and “sell high”. A trend is considered [...]
A Curious Combination: Momentum Investing, Tesla, and November 9th
“The plural of anecdote is not data” I’ve used this quote to discount the validity of a single observation to explain much of anything. That observation is true. Yet the real quote, attributed to Stanford researcher Ray Wolfinger, [...]
Buying Quality: Is the Juice Worth the Squeeze?
Investing is never easy, but some times are easier than others. Buying US government bonds at 10%+ yields when inflation was steadily decreasing in the 1980s was probably less worrying than buying them today at [...]
Building Factor Portfolios Based with the Lowest Correlations
INTRODUCTION The two basic rules of asset allocation are: i) identify assets with positive expected payoffs, and ii) ensure that the assets are not too highly correlated, so that diversification benefits can be harvested. Although [...]
Value Investing Factor Research: How to Improve the Piotroski F-Score Measure.
Introduction This project builds on research conducted by J. Piotroski, who published his paper Value Investing: The Use of Historical Financial Statement Information to Separate Winners from Losers in 2000, offering a simple yet powerful [...]
How To Design Machine Learning Models – A Market Timing Example
We at ENJINE are big believers in the potential of machine learning (or as some call, “artificial intelligence”) to transform asset management. However, it’s fair to say that machine learning hasn’t received mass adoption in [...]
How to Optimize Fixed Annuity Tax Deferral
Annuities are popular tools for retirement income planning. While stigmas exist around some annuity products (for good reason), recent research shows how fixed annuities can add value in the context of retirement income. In addition [...]
How to Measure and Understand Portfolio Tail Risk Events
Arnold Polanski, Evarist Stoja, Frank WindmeijerJournal of Applied Econometrics, 2019A version of this paper can be found here.Want to read our summaries of academic finance papers? Check out our Academic Research Insight category What are [...]
An Introduction to Digital Signal Processing for Trend Following
Digital signal processing (DSP), specifically the use of digital filters, is embedded in many indicators used by technical analysts to study and make trading decisions using time series of stock, bond, currency, commodity, and other [...]
Planning Opportunities: Why Gift It, If You Can Loan It?
The coincidence of historically low-interest rates and the increased gift tax exemption under the 2017 Tax Cuts and Jobs Act has temporarily created an opportunity for high net worth families to tax-efficiently transfer wealth from generation to generation. Of course, families can use their [...]
Market Return Around the Clock
Market Return Around the Clock: A Puzzle Oleg Bondarenko and Dmitriy MuravyevWorking PaperA version of this paper can be found hereWant to read our summaries of academic finance papers? Check out our Academic Research Insight category [...]
Trading Costs Wipe Out the Overnight Return Anomaly
At least once a year, the press and Twittersphere propagate the mistaken idea that investors can earn excess returns by buying the S&P 500 at the close of the market, then selling it at the [...]
How I Explain Crappy Returns
Diversification. It looks great on paper, but for the past ten years, being globally and “Factor” diversified has been anything but great. Understandably, many diversified investors are looking at their returns and wondering why they [...]