Do Relative-Value Strategies Beat Traditional Systematic Value Investing Strategies?

By | 2018-03-13T07:34:57+00:00 March 14th, 2018|Research Insights, Value Investing Research, $SPY|

Readers often send us great questions related to different ideas on systematic value strategies. The outcome of years of back and forth with readers and internal discussions is several books and hundreds of blog posts [...]

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A few highlights from The Evidence-Based Investing Conference (West)

By | 2017-08-18T17:11:24+00:00 June 30th, 2017|Business Updates, $SPY, Yahoo Tickers, $IEF, $mtum, $vlue|

Earlier this week, I attended the Evidence-Based Investing Conference (West) and spoke on "The Factor Zoo" panel. I present a few highlights / takeaways from the event before you begin the 4th of July weekend. Of course, these [...]

Book Review — The Undoing Project: A Friendship That Changed Our Minds

By | 2017-08-18T17:09:06+00:00 March 15th, 2017|Research Insights, Guest Posts, Behavioral Finance, Book Reviews, $SPY|

Psychology permeates nearly every area of human endeavor. In the world of investing, for instance, psychology can help us understand the systematically poor decision-making that drives the academic anomalies explored on this blog. One cannot [...]

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Treasury Bills Outperform Most Stocks — Say What???

By | 2017-08-18T16:54:25+00:00 January 26th, 2017|Research Insights, $SPY, Active and Passive Investing, Macroeconomics Research|

Each morning we peruse a variety of research sites to see if there is anything exciting, new, and intriguing. Rarely does one find something that triggers a knee-jerk reaction like a recent paper by Hendrik [...]

Evidence-Based Investing Requires Less Religion and More Reason

By | 2018-03-02T10:37:48+00:00 July 27th, 2016|Value Investing Research, Momentum Investing Research, Tactical Asset Allocation Research, $SPY, $mtum, $vlue|

Technical Analysis: The Market’s Oldest Religion During the 1600s, the Dutch had a large merchant fleet and the port city of Amsterdam was a dominant commercial hub for trade from around the world. Based on [...]

Stale Performance Chasing: Beware of Horizon Effects

By | 2017-08-18T16:56:43+00:00 July 21st, 2016|Research Insights, $SPY|

Investors talk a big game when describing how they evaluate mutual funds. They say they consider things like the objectives of the fund, its size, and the longevity of its managers. But there’s one factor that looms [...]

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The Folly of Stock Market Forecasting

By | 2017-08-18T16:55:36+00:00 July 12th, 2016|Guest Posts, Tactical Asset Allocation Research, $SPY|

The idea that one can predict stock market movements is somewhat insane. The major problem with stock market forecasting is the lack of evidence that it is possible. I am unaware of any market commentator that [...]

Expanding the Efficient Frontier with Value and Momentum Strategies

By | 2017-08-18T17:05:19+00:00 December 9th, 2015|Research Insights, Value Investing Research, Momentum Investing Research, Tactical Asset Allocation Research, $SPY|

Awww...modern portfolio theory...that feel-good construct I teach to all of my graduate-level finance students each year. Simply input 1) a vector of expected returns and 2) a covariance matrix into your computer, and voilà, you [...]

Charlie Munger on “Loading Up,” Tracking Error, and Value Investing

By | 2017-08-18T17:08:15+00:00 June 29th, 2015|$SPY, $brk-a|

Back in 1994, Charlie Munger gave a talk to students at the USC Business School (a copy is here), covering topics ranging from mathematics and behavioral psychology, to pari-mutuel systems and investment management. As usual, [...]

How to Make Money in Markets: Understanding Expectation Errors

By | 2017-08-18T17:03:19+00:00 June 24th, 2015|Behavioral Finance, Value Investing Research, $SPY, Yahoo Tickers|

A new working paper from Gennaili, Ma, and the one-the-only Andrei Shleifer. Expectations and Investment Using micro data from Duke University quarterly survey of Chief Financial Officers, we show that corporate investment plans as well [...]

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Sobering 10-Year Market Predictions from CFOs

By | 2017-08-18T16:56:49+00:00 June 15th, 2015|Tactical Asset Allocation Research, $SPY, Macroeconomics Research|

The Graham-Harvey survey is complete and the expectations of CFOs are available for review. As the figure below highlights, expected returns on the S&P 500 have been gradually decreasing over time. As of Q1 2015, [...]

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Basic Factor Analysis: Simple Tools to Understand What Drives Performance

By | 2017-08-18T17:09:45+00:00 May 28th, 2015|Research Insights, Investor Education, Introduction Course, $SPY|

Investors should know what they are buying and why they are buying it. Unfortunately, more often than not, investment products are jammed down the throats of unsuspecting victims who are either ignorant, easy to influence, [...]

From the Frontlines to Finance: How the Marines Shaped Our Investment Philosophy

By | 2017-09-28T12:22:13+00:00 May 25th, 2015|Research Insights, Key Research, $SPY|

Serving in the Marine Corps was an unforgettable experience. Civilians often tell us “thank you for your service”; however, the real “thanks” is due to the Corps for giving us valuable life lessons. The not-so subtle teachings bestowed upon us by heavily muscled, insanely aggressive Marine Corps Drill Sergeants are still, literally, ringing in our ears: “Listen here, pond scum, you better run faster, shoot straighter, and decide quicker if you are going to win in battle!” Years later, we would test that theory in real-time, battling insurgents in Iraq. As we trade in our flak jackets for laptops and neckties, the lessons learned in combat and are not only relevant, but vital on the battlefield of high finance. Four core lessons apply to frontlines and finance: Humans Are Emotional: Systematic processes beat behavioral bias; Rambo isn't Realistic: Act based on evidence, not on stories; Complacency Kills: Focus on fundamentals and never stop learning; Integrity is Everything: Do things right and do the right thing.

What Drives the S&P 500 Equal-Weight Return Premium?

By | 2017-08-18T16:52:29+00:00 May 18th, 2015|Research Insights, $SPY, $rsp|

A recent academic paper, Equal or Value Weighting? Implications for Asset-Pricing Tests, highlights two methods of weighting: Equal-weight and Value weight. As the paper states: With monthly rebalancing, an equal-weighted portfolio outperforms a value-weighted portfolio in terms of total mean [...]