Trend-Following with Valeriy Zakamulin: Anatomy of Trading Rules (Part 4)
In our context, a technical trading indicator can be considered as a combination of a specific technical trading rule with a particular moving average of [...]
TREND-FOLLOWING WITH VALERIY ZAKAMULIN: TECHNICAL TRADING RULES (PART 3)
A trend following strategy is based on switching between a financial asset and cash depending on whether the asset prices trend upward or downward. Specifically, [...]
Diversification Benefits of Time Series Momentum
Similar to some better-known factors like size and value, time-series momentum is a factor that historically has demonstrated above average excess returns. Time-series momentum, also called trend-momentum or absolute momentum, is measured by a portfolio long assets that have had recent positive returns and short assets that have had recent negative returns. Compare this to the traditional (cross-sectional) momentum factor that considers recent asset performance only relative to other assets. The academic evidence suggests that inclusion of a strategy targeting time-series momentum in a portfolio improves the portfolio’s risk-adjusted returns.
Volatility Premium, Covered Call Selling, and Knowing What You Own
The folks at AQR are top-notch researchers and have written a ton of great papers. Some of their more famous papers are the following: Value [...]
Academic Research Insight: Diagonal Models versus 1/N Diversification
Title: MITIGATING ESTIMATION RISK IN ASSET ALLOCATION: DIAGONAL MODELS VERSUS 1/N DIVERSIFICATION Authors: CHRIS STIVERS, LICHENG SUN Publication: THE FINANCIAL REVIEW, 2016 (version here) What are [...]
March for the Fallen Weekly Training Series: Workout Plan
Team: This post is part two in the training series for those participants in this year's March for the Fallen event. You are reading this for [...]
Avoiding Traumatic ESOP 1042 Election Distress
Medical scientists have identified a disorder, known as Traumatic 1042 Election Distress, that can afflict business owners who pursue Section 1042 sales of their company stock to an ESOP. The researchers recently concluded their clinical study, based on observations of hundreds patients over the past 30 years. Their newly published findings identify common stress patterns observed among business owner patients. The disorder is curable if diagnosed early.
Academic Research Insight: Digging into ETF Trading Spreads
In this article we discuss what the academic research says about ETF trading spreads and premiums. INEFFICIENCIES IN THE PRICING OF EXCHANGE TRADED FUNDS ANTTI [...]
March for the Fallen Weekly Training Series: Training Rules
This post is part one in the training series for those participants in this year's March for the Fallen event. You are on reading this for [...]
Kyle Baxter, Our Newest Teammate, is On Deck!
We wanted to formally welcome the newest addition to the Alpha Architect team, Kyle Baxter, who joins us as a Director of Portfolio Services. Kyle [...]
Podcast: Factor Timing is Next to Near Impossible (Jack)
Here is a link to our podcast on the Meb Faber Podcast. In Episode 61, we welcome Jack Vogel, CFO/CIO of Alpha Architect, and the [...]
My “Repackaging” Pet Peeve: Do Other Advisors See This As Well?
Like many advisors, I often find myself reviewing accounts and historical performance for clients and prospects with investments at other firms. Of course I see [...]
Trick Question: How is the Momentum Factor Performing YTD?
If you ask your typical long-only investor (or financial advisor) how momentum is doing this year they'll likely say, "Amazing!" This statement will almost surely [...]
Academic Research Insight: When Does International Investing Make Sense?
Title: MONONATIONALS: THE DIVERSIFICATION BENEFITS OF INVESTING IN COMPANIES WITH NO FOREIGN SALES Authors: CORMAC MULLEN AND JENNY BERRILL Publication: FINANCIAL ANALYST JOURNAL, II Q 2017 (version here) What [...]
Trend-Following with Valeriy Zakamulin: Types of Moving Averages (Part 2)
In this post we aim to give an overview of some specific types of moving averages. Specifically, we cover "ordinary" moving averages and mention some examples of exotic moving averages.
Elisabetta and Tommi Are Helping us Empower Investors Through Education
Our mission is to empower investors through education. This mission is our passion and what drives us to go to work everyday. But we can't fulfill our [...]
Academic Research Insights: Does the Scope of the Sell-Side Analyst Industry Matter?
Title: DOES THE SCOPE OF THE SELL-SIDE ANALYST INDUSTRY MATTER? AN EXAMINATION OF BIAS, AND INFORMATION CONTENT OF ANALYST REPORTS Authors: KENNETH MERKELEY, RONI [...]
Trend-Following with Valeriy Zakamulin: Moving Average Basics (Part 1)
One of the basic principles of technical analysis is that ``prices move in trends". Traders firmly believe that these trends can be identified in a timely manner and used to generate profits and limit losses. Consequently, trend following is the most widespread market timing strategy; it tries to jump on a trend and ride it. Specifically, when stock prices are trending upward (downward), it's time to buy (sell) the stock. Even though trend following is very simple in concept, its practical realization is complicated. One of the major difficulties is that stock prices fluctuate wildly due to imbalances between supply and demand and due to constant arrival of new information about company fundamentals. These up-and-down fluctuations make it hard to identify turning points in a trend. Moving averages are used to ``smooth" the stock price in order to highlight the underlying trend.
Avoiding Overpriced Winners: A Better Way to Capture the Momentum Premium?
Any frequent reader of our blog knows we are fans of momentum investing. At this point, investment professionals should know that momentum historically works, that momentum [...]
Academic Research Insight: Facts about Factors
Title: FACTS ABOUT FACTORS Authors: PAULA COCOMA, MEGAN CZASONIS, MARK KRITZMAN, DAVID TURKINGTON Publication: THE JOURNAL OF PORTFOLIO MANAGEMENT, SPRING 2017 (version here) [...]