Alpha Architect Research Blog

The Newest Alpha Architect Research and Insights


The Costs of Active Management

The Turnkey PhD and I were talking this afternoon about how egregious fees can get in the active money management business, with managers routinely charging 1-1.5% for assets under management, plus a performance fee of 20% of profits above $0.  ...

Predicting anomaly returns with politics, weather, global warming, sunspots, and the stars

Professor Novy-Marx does some really great research. We've highlighted his work on a few occasions. His specific work on the gross profits factor has influenced a lot of my own research. Novy-Marx has a really interesting piece discussing "data-mining:" Ferson, ...

Debt burdens are painful!

Reinhart (and another Reinhart) and Rogoff have another paper in their series about "Why debt sucks." The title of their newest work is "Debt Overhangs: Past and Present." Headline: We identify the major public debt overhang episodes in the advanced ...

Does Screening out Garbage Enhance Performance?

Jack and I are working on a new research paper that addresses a very simple question: Can investors improve their screening process by eliminating frauds, manipulators, and financially distressed firms? Answering this question appears easy, but as Cliff Asness and ...

Valueinvestorsclub.com Performance Update

If you are unfamiliar with Valueinvestorsclub.com and you call yourself a "value investor," you've been missing out on the greatest value communities of all time. VIC has really made an impact on the investment landscape: BusinessWeek Article Barrons Article Financial ...

Out of this world Macroeconomic Data

Measuring Economic Growth from Outer Space
  • Vernon Henderson, Adam Storeygard, and David Weil.
  • A recent version of the paper can be found here.
Abstract: GDP growth is often measured poorly for countries and rarely measured at all for ...

Risk Parity for Dummies

Risk parity asset allocation systems seem to be all the rage these days. Bonds vs Stocks? If you are unfamiliar with the strategy, Mebane Faber has some great videos outlining how risk parity works. Here is a source paper with ...

Dissecting Net-Net Returns over the past 6-months

Paul Sepulveda has an interesting guest post for us today. Paul dissects the recent performance of net-nets and identifies some interesting tidbits. Below I have posted the summary of his research, but if you are interested in digging into the details, ...

Exploiting Option Information in the Equity Market

Exploiting Option Information in the Equity Market Guido Baltussen, Bart Van Der Grient, Wilma De Groot, Erik Hennink and Weili Zhou http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2001461 Key Points:
  • Long/Short Value-Weighted alpha estimates of 118bp monthly. Sample covers data from 1996 to 2009.
  • Values ...

Are stock pickers better than Computers?

Empiritrage has a detailed research piece on the question of whether or not quantitative value can beat fundamental stock-pickers. http://empiritrage.com/2012/03/24/man-vs-machine-quantitative-value-or-fundamental-value/ Here are a few highlights: First, some summary statistics. MF_EW_Top10% represents a portfolio of Magic Formula stocks with market caps ...

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