Factor Investing Made In China

Harvesting Factor Returns in the Middle Kingdom This research note was originally published by the CAIA Association’s AllAboutAlpha blog. Here is the link. Q3 hedge fund letters, conference, scoops etc SUMMARY Common equity factors generated attractive risk-adjusted returns in the Chinese stock market Factor performance in China often mirrors global factor performance ...

Factor Optimization

Pure versus Dirty Factors SUMMARY Equity factors exhibit sector biases and exposures to other common factors A factor optimisation process allows investors to create pure factors Risk-adjusted returns do not increase, but pure factors are attractive from analytical, risk and allocation perspectives Q3 hedge fund letters, conference, scoops etc INTRODUCTION When large quantities of...

Private Equity: The Emperor Has No Clothes

This research note was originally published by the CFA Institute’s Enterprising Investor blog. Here is the link. Q3 hedge fund letters, conference, scoops etc SUMMARY Private equity returns can be replicated with small cap equities Small, cheap and levered stocks would have achieved higher returns since 1988 Valuation and debt multiples are...

Tactical Statistical Arbitrage

SUMMARY Statistical arbitrage behaves similarly across markets Volatility is the main performance driver Attractive strategy for diversifying an equity portfolio Q3 hedge fund letters, conference, scoops etc INTRODUCTION Strategies like Value or Momentum are like staples that deserve a permanent allocation in investors portfolios. In contrast, other strategies are more like sunscreen, which...

Equity Factors: Reducing Portfolio Turnover

SUMMARY Portfolio turnover of equity factors can be reduced significantly by trading more conservatively However, reducing turnover does not necessarily increase risk-return ratios It all depends on transaction costs Q3 hedge fund letters, conference, scoops etc INTRODUCTION Turnover in business tends to be positive or negative, depending on the context. Investors prefer businesses...

The Dark Side Of Low-Volatility Stocks

Long Bonds? This research note was originally published by the CFA Institute’s Enterprising Investor blog. Here is the link. Q3 hedge fund letters, conference, scoops etc SUMMARY Low-volatility stocks have outperformed the market over the last 25 years The strategy has reduced equity drawdowns in the US, Europe, and Japan significantly However, low-volatility...

Statistical Arbitrage In The US

Arbitraged Away? Q3 hedge fund letters, conference, scoops etc SUMMARY Statistical arbitrage has attractive strategy characteristics However, the returns are highly dependent on transaction costs Best used as a tactical strategy when volatility is high INTRODUCTION Equity markets in 2018 can be characterized by divergence. There is the US, showing strong returns, versus most...

Improving The Odds Of Value

Tactical versus Strategic Allocations to Value SUMMARY Value investors earn a premium for holding undesirable stocks Market skewness may identify periods where the premium is more attractive The returns from the Value factor since 1926 were zero when market skewness was negative Q3 hedge fund letters, conference, scoops etc INTRODUCTION Although buying cheap...

Factor Investing In Micro & Small Caps

Treasure Hunting in the Wild West of Equity Markets This research note was originally published by the CFA Institute’s Enterprising Investor blog. Here is the link. Get The Full Warren Buffett Series in PDF Get the entire 10-part series on Warren Buffett in PDF. Save it to your desktop, read it on your...

Liquid Alternatives: Alternative Enough?

This research note was originally published by the CFA Institute’s Enterprising Investor blog. Here is the link. Get Our Activist Investing Case Study! Get the entire 10-part series on our in-depth study on activist investing in PDF. Save it to your desktop, read it on your tablet, or print it out to...

Factor Olympics Q3 2018

And the Winner is… Get The Full Series in PDF Get the entire 10-part series on Charlie Munger in PDF. Save it to your desktop, read it on your tablet, or email to your colleagues. ...

Short-Term Momentum In Equity Factors

Summary Short-term momentum persists in common equity factors The persistence is strong in Value and Dividend Yield However, these results conflict with short-term mean-reversion on equity index level Get Our Activist Investing Case Study! Get the entire 10-part series on our in-depth study on activist investing in PDF. Save it to your...

Volatility, Dispersion & Correlation – Friends Or Foes?

SUMMARY Higher volatility & dispersion imply higher stock market risks The relationship between correlation and risk is not linear However, these market technicals do not behave consistently across time Get The Full Seth Klarman Series in PDF Get the entire 10-part series on Seth Klarman in PDF. Save it to your...

Chasing Mutual Fund Performance

This research note was originally published by the CFA Institute’s Enterprising Investor blog. Here is the link. [REITs] Q2 hedge fund letters, conference, scoops etc SUMMARY Mutual funds exhibit momentum when measured by their one-year performance Momentum disappears when more reasonable fund selection criteria are applied Performance does not seem effective for fund...

Factor Momentum

SUMMARY The Momentum strategy can be applied to stocks, sectors, countries and factors Factor momentum shows positive excess returns across regions However, single-stock Momentum performance is comparable and less complex to implement Get The Timeless Reading eBook in PDF Get the entire 10-part series on Timeless Reading in PDF. Save it...

How Crowded Are Technology Stocks?

This research note was originally published by the CFA Institute’s Enterprising Investor blog. Here is the link. Get The Timeless Reading eBook in PDF Get the entire 10-part series on Timeless Reading in PDF. Save it to your desktop, read it on your tablet, or email to your colleagues. ...

Factors: Shorting Stocks vs The Index

Do Short Stock Positions Contribute to Factor Returns? Get Our Activist Investing Case Study! Get the entire 10-part series on our in-depth study on activist investing in PDF. Save it to your desktop, read it on your tablet, or print it out to read anywhere! Sign up below! ...

Impact Of Single Stocks On Factor Returns

Do Single Stocks Matter for Factor Investors? SUMMARY Factor portfolios are typically created by equal weighting stocks The impact of single stocks is therefore reduced compared to market-cap weighted indices The FAANG stocks impacted factors differently Get The Timeless Reading eBook in PDF Get the entire 10-part series on Timeless Reading in...

Factor Crowding Model: Mob Management Measures

SUMMARY Crowded factors exhibit higher drawdowns than uncrowded factors A multi-metric approach can be successfully applied to measure factor crowding Effective in reducing factor drawdowns and volatility, but less meaningful for returns Get The Timeless Reading eBook in PDF Get the entire 10-part series on Timeless Reading in PDF. Save it...

Factor Olympics 1H 2018

And the Winner is… SUMMARY Factor performance in 1H 2018 is comparable to 2017 The Size factor has taken the lead, likely reflecting the threat of global trade wars Value has generated the most negative returns across regions Get The Timeless Reading eBook in PDF Get the entire 10-part series on Timeless...

Sector Versus Country Momentum

Does Performance Chasing Work? SUMMARY The Momentum strategy can be applied to stocks, sectors and countries Sector and country Momentum portfolios generate positive excess returns However, cross sector & country and single stock Momentum portfolios generate higher risk-return ratios Get The Timeless Reading eBook in PDF Get the entire 10-part series on...

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