Academic Research Insight: The Social Media Factor
Editor's Note: The Academic Research Insight will be a weekly short-form research summary on research that is directly related to investing. Elisabetta Basilico (a PhD [...]
The CFA Institute is Coming to Philly — Give us a Shout!
As many of you probably already know (it seems a large portion of our audience either has a PhD or a CFA), the CFA Institute's [...]
A Direct Test of the Dividend Catering Hypothesis
Why do CEOs decide to pay dividends? That is an interesting question, and one that academics have been researching for years. Miller and Modigiliani in [...]
Research Portal: 1042 ESOP Rollovers for Business Owners
Like most people confronting a perplexing challenge, business owners who are contemplating a Section 1042 sale of their equity to an ESOP frequently turn to the [...]
Chinese Market Anomalies – The Factor Killer?
The Oracle of Omaha just commented on the Chinese stock market in this year's Berkshire's annual meeting: ...Markets have a casino characteristic that has a [...]
Do Trading Costs Destroy Factor Investing?
There are a number of recent studies that propose a more rigorous criteria for evaluating the practical significance of factors published in academic research journals. [...]
(Fight) the Fed Model
Over the past few years, we've been asked questions related to the relationship between stock prices and interest rates. Forms of the question typically look like [...]
Alpha Architect Index Data/Information
We have updated the information associated with our indexes and are making the data more easy to access. We have the following index programs: Alpha Architect [...]
Swedroe Spotlight: Enhancing Momentum Strategies Via Idiosyncratic Momentum
Momentum is the tendency for assets that have performed well (poorly) in the recent past to continue to perform well (poorly) in the future, at [...]
The Capacity of Smart Beta Funds — Larger than Previously Thought?
ETFs and factor investing are on the tip of everyone's tongue these days. Factor investing is being couched as a "new" thing, despite the fact that institutional investors have been deploying these strategies for years. (See this working paper discussing the effective use of smart beta strategies by institutional investors.) However, because factor investing is now directly accessible via ETFs, those who are unfamiliar with factor investing are asking questions about how these "new" funds will affect the market. Two burning questions many investors have: What is the overall capacity of smart beta funds? What is the capacity of momentum-based funds, specifically?
Tactical Asset Allocation and the US 60/40 Benchmark
Our firm Allocate Smartly provides independent analysis of Tactical Asset Allocation (TAA) strategies. TAA strategies dynamically allocate to broad asset classes like stock indices, bond indices or gold. Unlike [...]
Academic Factor Exposure Versus Fund Factor Exposure
Tomorrow I'll be sitting with Pat O'Shaughnessy and Ben Johnson to discuss "Straight Talk About Smart Beta." Here is a link to the big Morningstar [...]
Visualizing IRA Rules Using Flowcharts
The rules around IRAs are really complicated and Wes asked if we could share our flow charts on the subject so others could potentially benefit [...]
How ETFs Might Affect Financial Markets
We've heard a lot of questions recently from clients and readers regarding how ETFs might affect financial markets. The short answer is "nobody knows." The [...]
Great Academic Finance Research Papers at WFA 2017
There are several big academic finance conferences that attract the best research and the best researchers in one bullpen -- the AFA and the WFA [...]
“Alternative” Facts about Formulaic Value Investing
A paper, "Facts about Formulaic Value Investing," is making the rounds and professes to plunge a dagger directly into the heart of systematic value investors. Half [...]
Value and Momentum Investing in Frontier Stock Markets
Value and Momentum investing have been studied across many different markets and asset classes (Asness et al 2013) and have shown to be effective factors. [...]
Swedroe Spotlight: Does Market Sentiment Help Explain Momentum?
David Smith, Na Wang, Ying Wang and Edward Zychowicz contribute to the literature on momentum with their paper, “Sentiment and the Effectiveness of Technical Analysis: Evidence from the Hedge Fund Industry,” which was published in the December 2016 issue of the Journal of Financial and Quantitative Analysis. Their work examines how investor sentiment affects the effectiveness of technical analysis strategies (which include the use of moving averages as well as momentum) used by hedge funds (which are considered sophisticated investors). The study was motivated by prior research that has focused on “investor sentiment,” which is the propensity of individuals to trade on noise and emotions rather than facts. Sentiment causes investors to have beliefs about future cash flows and investment risks that aren’t justified. Two researchers, Malcolm Baker and Jeffrey Wurgler, constructed an investor sentiment index based on six measures: trading volume as measured by NYSE turnover; the dividend premium (the difference between the average market-to-book ratio of dividend-payers and non-payers); the closed-end fund discount; the number and first-day returns of IPOs; and the equity share in new issues. Data is available at through Wurgler and New York University.
Introduction to a Basic “Quant” Match Making Service
We were recently asked by Aaron Brask, one of our guest bloggers, why we don't provide a "job board" on our site. Aaron works for several [...]
How are ETFs Affecting the Stock Market: Is There a Dark Side to ETFs?
The Dark Side of ETFs? Sounds interesting, and in my humble opinion, an image of Darth Vader on page 1 would be a great addition to [...]