Two Accounting Anomalies: One May Be Risk, the Other Is Mispricing
Accounting anomalies are dynamic, and the ultimate interpretation depends on sample period, market structure, and the pricing model used.
The Impressive Markets Hypothesis: Prices Still Know the Future
Markets are not perfect. Anomalies exist. But the idea that social media and information overload have fundamentally broken the relationship between prices and business fundamentals doesn’t survive contact with 20 years of data.
The Factor Zoo Has Hundreds of Animals — But Only a Handful of Species
Only a few truly distinct forces actually drive the market. The problem: too many factors, too little meaning.
When Everyone Trades the Same Factor Playbook
What happens to market prices when millions of investors simultaneously follow the same mechanical rules to rebalance the same portfolios? If you allocate to factor strategies, this paper has interesting findings as to where your returns are actually coming from.
Why Momentum Investing Has Been Struggling—And What Volatility Has to Do With It
A look at recent academic research connecting market volatility spikes to the underperformance of momentum strategies (especially for long/short versions of the strategy) The Big [...]
The Skip-Month Mystery: What Last Month’s Returns Are Really Telling You
New research challenges a long-standing rule in momentum investing—and reveals surprising insights about when to use it For decades, investors using momentum strategies have followed [...]
Factor MAX: A New Signal for Predicting Factor Returns
Investment professionals have long relied on factor investing—strategies built around characteristics like value, momentum, and quality—to generate returns beyond the broad market. But predicting which [...]
Unlocking Hidden Patterns: How Daily Returns Predict Future Stock Performance
The wealth of information contained in daily stock returns has been hiding in plain sight—and when properly extracted, it generates remarkable predictive power for future performance.
How AI Can Help Find the Needle in the Haystack
Artificial intelligence is rapidly transforming the investment landscape in ways that extend far beyond algorithmic trading and robo-advisors. One of AI's most promising applications lies [...]
Retail Investors and the Mispricing Puzzle
Institutional investors are frequently spoken of in the finance literature as “smart money” while retail investors are considered “noise traders” who suffer from a variety [...]
The Hidden Risks of Leveraged Single-Stock ETFs
Leveraged ETFs function precisely as designed—they deliver leveraged exposure to daily returns, not long-term performance. Problems emerge when investors misuse these instruments for purposes they weren't built for, particularly buy-and-hold investing or long-term wealth accumulation.
Taming the Anomaly Zoo: How Macroeconomic Forces Shape Market Returns
Success lies not in collecting exotic anomalies like rare zoo specimens, but in understanding the economic forces that drive sustainable return patterns. Focus on strategies with solid macroeconomic foundations, maintain healthy skepticism about new discoveries, and always account for implementation costs.
Is Trend Following Better than “Buy the Dip”?
"Buy the dip" (BTD) has become one of the most popular investment mantras of recent years, especially since the COVID-19 market recovery in 2020. The strategy seems intuitive: when markets fall, buy at a discount and wait for the inevitable rebound. However, BTD is not foolproof. By design, it performs well when market declines are brief, but poorly when declines mark the beginning of a prolonged drawdown. A new paper from AQR Capital Management, “Hold the Dip,” examines the empirical evidence and puts this popular strategy to the test.
Rethinking Growth Investing: Why Traditional Growth Indices Miss the Mark
Historically, the finance community (both academics and investment firms) has divided stocks into two categories: cheap and expensive. Initially, the book-to-price ratio was used to [...]
The Tax Revolution: How ETFs Are Reshaping Investment Strategies
While many investors initially gravitated toward ETFs for their intraday trading capabilities, lower expense ratios, and commission-free trading options, a deeper story has emerged: tax efficiency has become the primary driver of this massive migration, particularly for long-term taxable investors.
Where Factors Speak Loudest: Why Size Matters in Factor Investing
The size effect is alive and well, but it's more nuanced than we once thought. Rather than viewing it as a simple "small beats large" phenomenon, we should understand size as a critical dimension that shapes how effectively other investment factors perform.
Can Machine Learning Predict Factor Returns?
Can machine learning techniques improve the prediction of cross-sectional factor returns in equity markets?
ESG Metrics: Just Information or Value-Added Investment Intelligence?
As portfolios incorporate more sustainability data—from climate impact assessments to labor practices and board diversity metrics—a critical question emerges: Does this wealth of ESG information actually enhance portfolio performance, or is it merely additional data without tangible investment value?
The False Dichotomy: Why the Active vs. Passive Fund Debate Misses the Point
In the ongoing debates about the virtues of active versus passive investment strategies, a fundamental problem undermines meaningful discussion: there is no universally accepted definition of what constitutes a "passive" strategy.
Unlocking REIT Returns: Real Estate Investment Factors
Letdin, Seagraves, and Sirmans advanced our understanding of REIT asset pricing by developing and rigorously testing six REIT-specific return factors—size, value, momentum, earnings quality, low volatility, and short-term reversal—using decades of data.