Using data on 65,000 stocks from 23 countries, they evaluated the performance of the Fama-French factors, examining the factor premia in global markets to verify their robustness across different company size categories and geographical regions. Their data sample covered the period 1987-2019.
One of the big problems for the first formal asset pricing model developed by financial economists, the CAPM, was that it predicts a positive relationship between risk and return. However, empirical studies have found the actual relationship to be basically flat, or even negative. Over the last 50 years, the most “defensive” (low-volatility or low-beta, low-risk) stocks have delivered both higher returns and higher risk-adjusted returns than the most “aggressive” (high-volatility, high-risk) stocks.
Liquidity—the ability to buy and sell significant quantities of a given asset quickly, at low cost, and without a major price concession—is valuable to investors. [...]
Hendrik Bessembinder contributes to the literature on the returns to public equity investment diversification benefits with his study “Wealth Creation in the US Public Stock [...]
Sustainable investing has grown substantially in recent years, demonstrating that investor demand can be driven by nonfinancial issues such as environmental (E), social (S), and [...]
Because of the complexity inherent to ETF trading in the secondary market, there are frequent misunderstandings about the relationship between the liquidity of the underlying [...]
Recent research, including the 2020 studies “Explaining the Recent Failure of Value Investing” and “Intangible Capital and the Value Factor: Has Your Value Definition Just [...]
My March 23, 2021, article for Alpha Architect addressed the issue that in recent years the field of empirical finance has faced challenges from papers arguing that [...]
A large body of evidence, including the studies “Is There Momentum in Factor Premia? Evidence from International Equity Markets,” Factor Momentum Everywhere (Summary)” and “Factor [...]
From 2017 through March 2020, the relative performance of value stocks in the U.S. was so poor, experiencing its largest drawdown in history, that many [...]
Academic research has found that factor premiums are both time-varying and dependent on the economic cycle. For example, Arnav Sheth, and Tee Lim, authors of [...]
Since the development of the capital asset pricing model (CAPM) about 50 years ago, academic researchers have documented hundreds of “anomalies” that generate significant positive [...]
A firm’s stock price should reflect the value of both its tangible and intangible capital. While tangible capital has been widely studied, intangible capital has [...]
Recent research, including the 2020 studies “Explaining the Recent Failure of Value Investing” and “Intangible Capital and the Value Factor: Has Your Value Definition Just [...]
While environmental, social, and governance (ESG) investing continues to gain in popularity, economic theory suggests the share prices of “sin” businesses (typically those involved in [...]
My August 17, 2020, article for Advisor Perspectives, “Factor-Based Investing Beats Active Management for Bonds,” provided the evidence from a series of academic papers on [...]
Prospect theory was developed by Daniel Kahneman and Amos Tversky in 1979. The theory starts with the concept of loss aversion—the observation that people react [...]
Two of the more interesting puzzles in finance are the high beta anomaly (high beta stocks have lower returns) and the IVOL anomaly (stocks with [...]
As the following table demonstrates, since its inception in the 1970s, the private equity industry has grown significantly. According to Preqin data, there are now [...]
As far back as 1976, with the publication of Fischer Black’s “Studies of Stock Price Volatility Changes” financial economists have known that volatility and returns [...]
© Copyright 2023 alpha architect | All Rights Reserved | Home | Terms of Use | Privacy Policy | Disclosures | Subscribe | Contact Us
