Factor Timing: Keep It Simple
Key Points We analyze three factor-timing strategies and find that a strategy based on a factor’s discount (or valuation) and momentum is the most effective tool for determining how... Read More
How COVID-19 Vaccines and Brexit Create the Trade of the 2020s
Key Points Around the globe, value is trading at extremely deep discounts relative to growth. The discounts are wide no matter how we measure valuation. While we still like... Read More
Plausible Performance: Have Smart Beta Return Claims Jumped the Shark?
Key Points Performance backtests are often used as evidence to “prove” a smart beta strategy is “better” than its competitors. In our view, careful attention must be given to... Read More
Standing Alone Against The Crowd: Abandon Value? Now?!?
Key Points In a prolonged anti-value momentum-driven rally, it’s easy and natural to forget the long-term value proposition of a rebalancing discipline. The evidence and intuition underlying a contrarian... Read More
What Is Quality?
Jason Hsu and Vitali Kalesnik discuss which definitions of the quality factor are robust and have been shown to generate a return premium. Their findings suggest a link between... Read More
Robert Shiller Explains Narrative Economics
Nobel Laureate Robert Shiller, interviewed by Rob Arnott, expounds on the importance of narratives in driving economic events. Q2 hedge fund letters, conference, scoops etc Robert Shiller, PhD Sterling Professor of Economics,... Read More
The Unintended Consequences Of Thinking In Dollars
Kelly Shue’s research challenges the conventional wisdom that size is the fundamental determinant of volatility and offers investors a window on an under-appreciated driver of asset price movements. Q2 hedge... Read More
The Business Case For Purposeful Business
Based on his research, Alex Edmans shows how a corporation treats its employees and how closely it follows governance-related best practices is indicative of positive long-term outcomes for investors. Q2... Read More
Bubble, Bubble, Toil And Trouble
Key Points Q2 hedge fund letters, conference, scoops etc The authors define a bubble and an anti-bubble so that investors can avoid or select, respectively—in real time—the impacted assets or... Read More
Dismiss MMT At Your Peril
Key Points Modern Monetary Theory (MMT) argues that governments with fiat currencies should coordinate treasury and central bank actions to fund government programs by directly printing money, unconstrained by... Read More
Rob Arnott: Are Valuations Irrelevant?
With US stock market valuations exceeding all historical valuation levels—except for those hit at the peak of the dot-com craze—Rob Arnott examines the subsequent performance of companies, which were... Read More
The Inverted Yield Curve
Cam Harvey speaks to the currently inverted yield curve as an indicator of a slowing economy, further expounding on his Conversations of January 2019. Q1 hedge fund letters, conference, scoops... Read More
Strike The Right Balance In Multi-Factor Strategy Design
Key Points Our analysis examines combinations of six factors (value, low beta, profitability, investment, momentum, and size) in simple long-only, investable portfolios that reflect real-world strategies. Based on our... Read More
The History Of The Cross-Section Of Stock Returns
Juhani Linnainmaa cautions investors to be wary of alpha decay in newly discovered factors. Using fresh, pre-discovery data, his out-of-sample analysis shows about half of the many factors tested... Read More
Alice’s Adventures In Factorland: Three Blunders That Plague Factor Investing
Abstract Factor investing has failed to live up to its many promises. Its success is compromised by three problems that are often underappreciated by investors. First, many investors develop exaggerated... Read More
Multi-Factor Design, Part 1 – Mixing vs. Integrating
We compare the two most popular multi-factor strategy construction methods of mixing and integrating, and recommend when each of the two strategies is the more suitable for an investor’s... Read More
The Winning Formula: Mission + Culture + Team
Key Points At Research Affiliates, our winning formula focuses on mission, culture, and team. We believe a corporate culture that supports the development of its employees will in turn... Read More
RA Conversations: The Flattening Yield Curve
Cam Harvey looks at the yield curve today through the lens of his 1986 pioneering work on yield-curve inversions and their foreshadowing of economic downturns. mohamed_hassan / Pixabay Q3 hedge fund... Read More
A Backtesting Protocol In The Era Of Machine Learning
Abstract Machine learning offers a set of powerful tools that holds considerable promise for investment management. As with most quantitative applications in finance, the danger of misapplying these techniques can... Read More
Alternative Risk Premia: Crisis or Opportunity?
Key Points We define and study the alternative risk premia (ARP) universe through four distinct core strategy types: equity neutral, volatility, trend, and macro. We believe that a host... Read More
The Challenges Of Diversity Investing
Key Points Both academic research and our own experience indicate that the business case for corporate diversity is compelling as a result of higher collective intelligence. Testing the investment... Read More
Alternative Risk Premia: Valuable Benefits For Traditional Portfolios
Key Points Most investors seek to earn a 5% annualized return above inflation to securely meet their financial needs in retirement. With today’s low expected returns across financial markets,... Read More
