FactorResearch – ValueWalk Premium

Don’t Get Carried Away By Carry

Observing unusual but insightful cross-asset relationships Q3 2020 hedge fund letters, conferences and more This research note was originally published by the CAIA Association’s AllAboutAlpha blog. Here is the link. SUMMARY Carry across asset classes has not performed strongly over the most recent decade Currency carry and Value & Size equity factors exhibited the same...

Factor Exposure Analysis 101

Testing the effectiveness and sensitivity of linear regressions Summary Linear regression is widely used for factor exposure analysis However, a high R2 and low p-value can be misleading Unsurprisingly the data quality matters Introduction Some fields of science like math or statistics seem to be too dry to be joking about, but...

Factor Olympics Q3 2020

And the winner is... Q2 2020 hedge fund letters, conferences and more SUMMARY Momentum & Quality are leading the performance scoreboard in Q1-3 2020 Value & Size generated negative returns, like in recent years, and Low Volatility ended a 10-year fantastic run 2020 is shaping up as a year of highly...

Does Financial Leverage Make Stocks Riskier? 

Or asked differently, can companies boost returns via leverage? Q2 2020 hedge fund letters, conferences and more This research note was originally published by ETF Stream’s Beyond Beta Magazine. Here is the link. SUMMARY The leverage of US stocks has been increasing over the last four decades The most leveraged stocks did...

Aging & Equities: Selling Stocks for the Long-Term

The negative impact of demographics on equities Q2 2020 hedge fund letters, conferences and more This research note was originally published by the CFA Institute’s Enterprising Investor blog. Here is the link. SUMMARY There is a negative relationship between aging populations and stock valuations Given that most developed markets are aging, this creates structural headwinds...

Merger Arbitrage: Arbitraged Away?

Another Questionable Diversification Strategy Q1 2020 hedge fund letters, conferences and more This research note was originally published by the CAIA Association’s AllAboutAlpha blog. Here is the link. SUMMARY As AUM in merger arbitrage has increased, alpha decreased Investors can access merger arbitrage via hedge funds, bank indices, and ETFs The strategy is not as...

Factor Olympics 2019

And the Winner is... Q3 2019 hedge fund letters, conferences and more SUMMARY As in 2018, Low Volatility produced the best and Value the worst performance Value did not recover significantly further after a short rally in Q3 2019 However, Momentum broke its upward trajectory since then INTRODUCTION We present the performance of...

Factor Investing In Emerging Markets

Is It Worth It? Q3 2019 hedge fund letters, conferences and more SUMMARY The trends in factor performance are similar in emerging and developed markets Factor returns were higher in emerging than in developed markets However, higher transaction costs need to be considered carefully INTRODUCTION Capital markets of developed countries like the US...

Low Volatility Vs Option-Based Strategies

Core Equity Alternatives Q3 2019 hedge fund letters, conferences and more This research note was originally published by the CAIA Association’s AllAboutAlpha blog. Here is the link. SUMMARY Option-based strategies have similar characteristics to Low Volatility portfolios Combining these reduces idiosyncratic strategy risks The combinations feature higher risk-adjusted returns and lower drawdowns than the S&P...

Factor Investing On Country Level

Away with Stocks? Q2 hedge fund letters, conference, scoops etc SUMMARY Investors can harvest returns from common equity factors on country level Returns are consistent when combined into a multi-factor portfolio Performance of some factors is comparable to those on single stock level, indicating common drivers INTRODUCTION Factor investing strategies like Value are...

Quant Strategies: Theory vs Reality

Can Returns Seen in Research Be Achieved? Q2 hedge fund letters, conference, scoops etc This research note was originally published by the CAIA Association’s AllAboutAlpha blog. Here is the link. SUMMARY The live performance of quant strategies is significantly worse than in backtesting Factor investing returns from research are frequently challenged as being overstated However,...

Mapping My Mind: Value Factor

What have I learned so far? Q1 hedge fund letters, conference, scoops etc SUMMARY There is consistency in the performance of the Value factor across markets and asset classes Allows to create a coherent framework of how to think about Value Suggests a global driver of factor performance INTRODUCTION Our research aims to...

Factor Olympics 1H 2019

And the Winner is... Q1 hedge fund letters, conference, scoops etc Summary Most factors generated positive returns in 1H 2019 Low Volatility produced the best and Value the worst performance Factor performance is comparable in the US & Europe, but markedly different in Japan Introduction We present the performance of five well-known factors on an...

The Case Against Small Caps

Testing Alternative Metrics to Market Capitalization Q1 hedge fund letters, conference, scoops etc This research note was originally published by the CFA Institute’s Enterprising Investor blog. Here is the link. SUMMARY The performance of the Size factor in the US was positive since 1926, but not particularly attractive Returns in Europe were more favorable, but...

How To Allocate Smartly To Smart Beta

Takeaway versus Home-Cooked Investing Q1 hedge fund letters, conference, scoops etc This research note was originally published in the Beyond Beta magazine from ETF Stream. Here is the link. Summary Single factor excess returns are attractive over the long-term, less in the short-term Comparing popular asset allocation models does not highlight one superior...

Cheap Versus Expensive Countries

Value on Country Level Q1 hedge fund letters, conference, scoops etc SUMMARY A global value portfolio on country level features structural country biases Returns were positive since 1990, but lacked consistency Value on country and single stock level exhibit the same trends, highlighting common performance drivers INTRODUCTION Holding Value stocks is emotionally challenging...

Improving The Momentum Factor

Summary The performance of the Momentum factor in the US has been poor since 2000 Fundamental valuation spreads were ineffective for improving the performance Combinations with other factors and factor volatility filters would have yielded better results Q1 hedge fund letters, conference, scoops etc Introduction John H. Cochrane of the Hoover Institution...

Option-Based Strategies: Opt In Or Opt Out?

Harvesting Fear and Greed This research note was originally published by the CFA Institute’s Enterprising Investor blog. Here is the link. Q1 hedge fund letters, conference, scoops etc SUMMARY Option-based strategies generated better risk-adjusted returns than the S&P 500 over the last 30 years Investors should be wary of buying options and...

Replicating Famous Hedge Funds

Do Hedge Funds Generate Alpha or Simply Provide Factor Exposure? Q1 hedge fund letters, conference, scoops etc This research note was originally published by the CAIA Association’s AllAboutAlpha blog. Here is the link. SUMMARY Diverse hedge fund strategies can be replicated via factor-mimicking portfolios The analysis highlights that most returns are explained by factors, not...

Warren Buffett: The Greatest Factor Investor Of All Time?

How Much Alpha Did Warren Buffett Generate? Q1 hedge fund letters, conference, scoops etc This research note was originally published by the CFA Institute’s Enterprising Investor blog. Here is the link. Summary A factor exposure of Berkshire Hathaway reveals structural factor tilts Long Value, Size, Quality, and Low Volatility factors and short...

Multi-Factor Smart Beta ETFs

A Recipe Only As Good As Its Ingredients This research note was originally published by Investments & Pensions Europe (IPE). Here is the link. Q4 hedge fund letters, conference, scoops etc mohamed_hassan / Pixabay Summary Investors have leaned towards multi-factor over single-factor products in recent years The factor selection and portfolio construction of...

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