Factors, or "style" investing, seems to be all the rage these days, including the use of factors in fixed income (here, here and here are good places to start). However, many of these strategies focus on [...]
What do most people consider to be the biggest benefit of retirement accounts? Many investors and advisors will say, "tax deferral." But a recent article (pdf version) I wrote highlighted that the real value of retirement [...]
It ain't what you don't know that gets you into trouble. It's what you know for sure that just ain't so. -- attributed to Mark Twain. Mark Twain had some great insights. The quote above [...]
Assume you made a decision to invest in an active strategy based on, say, a backtest of the underlying process (to be clear, active means NOT passive market-cap weight in my context). Over the next few [...]
Mirror, mirror, on the wall – which is the fairest of them all? Recent commentary (to include a recent Barron's article) seems to suggest that value is dead and may never come back. Of course, most [...]
Many people talk about the tax benefits of retirement accounts. However, few attempt to quantify and estimate the actual benefits. To make matters worse, when the topic is addressed, many of the discussions rely on [...]
This article proposes tail risk hedging (TRH) as an alternative model for managing risk in investment portfolios. The standard risk management approach involves a significant allocation to hiqh-quality bonds. However, this approach has historically reduced [...]
Watching stock prices drop quickly can be terrifying. In late January, every big decline in stock prices was greeted with lots of media coverage, cable news networks rolling out their "market in turmoil" graphics, and [...]
Executive Summary Factor investing promises outperformance at low cost. But to add value in a portfolio, it must deliver positive risk-adjusted returns and with low correlation to existing holdings. Historically, pure factor exposures have earned [...]
Smart beta (or factor investing) seems to be the product du jour in ETFs. There are so many different factor products available that just about every fund company seems to offer them...even Vanguard is launching [...]
Merger arbitrage, sometimes known as "risk arbitrage," is an investing strategy in which the investor bets on announced M&A deals. After a merger is announced, shares of the target tend to trade below the offered [...]
Wes asked that I contribute to the ongoing debates regarding the construction of value and momentum portfolios. There are three key research pieces on the topic, all with different viewpoints: Alpha Architect's take AQR's take [...]
It has been well-documented that value stocks have provided higher expected returns than growth stocks. However, there is a great debate about the source of that premium: Is it risk-based or is it related to [...]
There has been much discussion of the small-cap premium recently. Has its popularity cannibalized its utility? Are large firms preventing a level playing field? Will the small-cap premium exist going forward? This article does not [...]
Many investors, investment professionals, and pundits make comments regarding the relationship between stock correlations and opportunities for active stock pickers. For example, here is a recent example from the Financial Times: Correlation crash clears way [...]
The subject of asset bubbles and market crashes has fascinated me for more than 20 years. As an options market maker for Susquehanna International Group ("SIG"), extreme price movements were a daily source of concern. I [...]
Short Interest and Lottery Stocks Kelley Bergsma & Jitendra Tayal A version of this paper can be found here Want to read our short summaries of academic finance papers? Check out our Academic Research Insight category. What are [...]
One area in investing that is often overlooked by investors is trade execution, which relates primarily to commissions, bid-ask spreads, and price impact. Yet sometimes it is trade-execution alone that can make the difference between [...]
The market has recently experienced record low levels of realized volatility and the VIX™ (volatility index) has fallen to historic lows. Moreover, the incredibly popular FAAMG stocks[ref]FAAMG is an abbreviation referring to the stocks of [...]
Some things in life are naturally made for each other. Some examples include the following: Peanut Butter and Jelly Starsky & Hutch Value and Momentum So my ears perked up when the idea of combining [...]
