Afraid of Market Risk? Stop. Be Afraid of Bias.
Stock markets have been sucking wind recently. S&P R2K When I listen to the nightly news or indulge in 30 seconds of CNBC during the day, [...]
CEO Indiscretions: Sex, Lies, and Firm Value
The Agency Costs of Managerial Indiscretions: Sex, Lies, and Firm Value Cline, Walkling, and Yore A version of the paper can be found here. Want a [...]
Low-Volatility Investing: Avoid High Beta Stocks. Period.
We've posted simulation and research-based studies on value and momentum. The evidence was pretty clear: never buy expensive stocks (Value) and ride winners and cut [...]
Shocking: CEOs Do Things for Personal Gain
Strategic News Releases in Equity Vesting Months Edmans, Pinto, Wang and Xu A version of the paper can be found here. Want a summary of academic [...]
Behavioral Bias Bingo — The Whimsical Cuteness Effect
"So Cute I Could Eat it Up": Priming Effects of Cute Products on Indulgent Consumption Nenkov and Scott A version of the paper can be [...]
The Quantitative Value Investing Philosophy
Benjamin Graham, who first established the idea of purchasing stocks at a discount to their intrinsic value more than 80 years ago, is known today as the father of value investing. Since Graham’s time, academic research has shown that low price to fundamentals stocks have historically outperformed the market. In the investing world, Graham’s most famous student, Warren Buffett, has inspired legions of investors to adopt the value philosophy. Despite the widespread knowledge that value investing generates higher returns over the long-haul, value-based strategies continue to outperform the market. How is this possible? The answer relates to a fundamental truth: human beings behave irrationally. We are influenced by an evolutionary history that preserved traits fitted for keeping us alive in the jungle, not for optimizing our portfolio decision-making ability. While we will never eliminate our subconscious biases, we can minimize their effects by employing quantitative tools.
How to calculate 3-factor (Fama-French) and 1-factor (CAPM) alpha
We've had a few questions related to 3-Factor Fama-French and 1-Factor (CAPM) alpha calculations recently (maybe it is midterm season?). Here is a deeper dive [...]
Quantitative Value Research: E/P or Size Effect?
Earnings Yields, Market Values, and Stock Returns Jaffe, Keim and Westerfield A version of the paper can be found here. Want a summary of academic papers [...]
Introducing our Newest Teammate: Ooh-rah!
Our adventure started over 4 years ago as a 1-man band blogging about esoteric finance research (me) and has expanded into a business with 7 [...]
Quantitative Value Research: Cyclically-adjusted P/E (CAPE) Factor
Stock Prices, Earnings, and Expected Dividends Campbell and Shiller A version of the paper can be found here. Want a summary of academic papers with alpha? [...]
Quantitative Value Research: Low P/E
For the next 30-60 days we'll be posting a recap research report on classic research related to quantitative value investing. This is the first part of the [...]
Interesting Finding: Professors aren’t Totally Useless!
Professors in the Boardroom and Their Impact on Corporate Governance and Firm Performance Bill Francis, Iftekhar Hasan, Qiang Wu A version of the paper can [...]
A New Take on SEC Comment Letters: Positive Drift!
Textual Classification of SEC Comment Letters James P. Ryans A version of the paper can be found here. Want a summary of academic papers with alpha? [...]
Complexity Doesn’t Equal Value: Morningstar Video
A short discussion I had with Sam Lee over at Morningstar. Transcript below: Sam Lee: Hi, I'm Sam Lee, ETF strategist with Morningstar, here at theMorningstar [...]
Podcast: From Concept to Reality (Wes)
Here is a link to our podcast at The Nantucket Project Wes Gray, Founder and Executive Managing Member of Empiritrage presents From Concept to Reality, [...]
Quant Blog Mashup at TheWholeStreet.com
Mike has a cool concept going over at TheWholeStreet.com. I usually read this alongside AbnormalReturns.com and then spend 1-2hrs a day reading various academic research websites, [...]
Behavioral Bias Bingo — False-Consensus Bias
I Believe...Why Don't You? To believe your own thought, to believe that what is true for you in your private heart, is true for all [...]
Beta Launch of our New Tools
We've been buried in ETF operations the past 6 months, but we are finally getting around to launching out new set of tools. Most of [...]
Rat-powered Hedge Funds? A Frightening Concept
A professor buddy sent a link to an outstanding article that mentions a study where researchers study the performance of a rat's ability to learn how [...]
Morningstar 2014 ETF Conference Slides
Many of you have asked for the slides I presented at the ETF conference on tactical asset allocation. Note, the 2nd slide is an animation [...]