Alpha Architect Research Blog

The Newest Alpha Architect Research and Insights


Great Minds Agree to Disagree on the Source of the Value Investing Premium

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Active investing sounds so easy. But we all know it is extremely difficult. Ask any deep value investor how they have felt over the past few years (although, they are feeling a lot better recently). Certainly, any credible active investor ...

In Calm Markets Should We Buy “Cheap” Put Protection?

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Time for a little myth busting. Recently, the Motley Fool posted an article that argued the following: when market volatility is low, protective put options are cheap. From the article: Smart investors know that the time to buy most investments ...

An Evidence-Based Low Volatility Investing Discussion

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Jack and I had the honor of attending the Evidence-Based Investing conference, hosted by the team at Ritholz Wealth Management. Wow. What a great event and a great group of inspiring investors and thinkers. Abe, Meb, John, Mike, and I ...

Book Review: Investing in Foreign Stocks

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In their search for strong investment returns, many investors have increasingly looked abroad to international markets. International diversification makes sense from several perspectives. For instance, we wrote here about a paper that argued that some decisions to allocate to U.S ...

Long-Short Investing Might Shorten Your Investment Lifespan

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Over the past several decades, academics have identified numerous variables that seem to predict future expected returns. This has led to a proliferation of so-called "factors" identified in the literature, and created what John Cochrane has labeled the "factor zoo." ...

Calling All Veterans Interested in Finance: How Can we Help?

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Today is the 241st birthday of the Marines, which is celebrated by all Marines around the world. Tomorrow is Veteran's Day. A great time of year to reflect and thank all veterans for keeping America awesome. As former Marines, we ...

Earth to Passive Investors: Lunch is Never Free.

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Imagine the following scenario: A strategy that outperforms everything. An ability to scale the strategy at no costs. A beating drum highlighting the infallible logic of the strategy. And the best part is this strategy costs an investor next to ...

DIY Asset Allocation Weights: November 2016

Alpha Architect Tools DIY Investing Tool
Do-It-Yourself tactical asset allocation weights are posted. Create a free account here if you want to access the site directly. Sign in here if you already have a free account. Strategy Date Domestic Value Domestic Mom Int'l. Value Int'l. Mom ...

Value Investing using Enterprise Multiples — Is the Premium Due to Risk and/or Mispricing?

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At Alpha Architect, we are big fans of Value investing (and Momentum). In the past, Wes and I examined which valuation measure had the largest spread between Value and Growth firms. The evidence showed (updated results here) that Enterprise Multiples ...

The Rebalance Bonus for Value and Momentum Porfolios

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A sophisticated DFA-focused advisor asked us to conduct some research on the following question: Are there additional portfolio diversification benefits to combining concentrated portfolios of value and momentum stocks relative to combining less concentrated portfolios of value and momentum stocks? ...

Book Review — Common Stocks and Common Sense

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Investing can perhaps be best learned through a combination of applied practice and continuous study. While there is no substitute for real-world experience and the valuable lessons learned from making and losing money, reflecting on the wisdom of those who ...

How to Turn an Engineer into a Quantitative Investor

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We receive multiple requests from readers looking to break into the finance industry. Quite often the reader is currently working in a traditional engineering job and looking to make a career switch. The question we often hear is “How does ...

Reflexivity and the Feedback Effect in Financial Markets

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Eugene Fama's Efficient Market Hypothesis argues that because stock prices follow a "random walk," future price behavior cannot be predicted. In his seminal paper, "Random Walks in Stock Market Prices," he explains the relationship between prices and fundamentals: If the ...

Evidence-Based Nutrition

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Evidence matters. Consider the history of evidence about the universe. In the days of Ptolemy in 100 AD, a "geocentric" model described the universe, in which the sun, moon and stars all revolved around the earth. Watching bodies revolve in ...

How to Measure Momentum?

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Since we've released our new book, Quantitative Momentum, we've received a handful of basic questions related to momentum--specifically as it relates to stock selection. At this point, the so-called "momentum effect" has occupied academic researchers for several decades. Researchers have ...

What is the best “Risk-Off” Asset for Trend-Followers?

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So you're a trend-follower. Great. But here is a question: What do you invest in when your rules suggest "risk off?" Many investors suggest low duration cash or t-bills. Seems reasonable. But is it optimal? Perhaps we should invest in ...

Digging Deeper into Closed End Fund Investment Opportunities

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A couple of weeks ago, I received Franklin Templeton Investments' letter to shareholders of Franklin Limited Duration Trust (ticker FTF) imploring us to not let "self-serving" Saba (an activist shareholder) "DESTROY YOUR FUND" [their bold and all caps, not mine] ...

Value Investing Got Crushed During the Internet Bubble — Here’s Why…

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The dot-com bubble of the late 90s was a wild time in the stock market. Internet stocks were trading through the roof, tech IPOs were a practically daily experience, and people quit their jobs to make millions day trading. And ...

Want to Learn Way Too Much About Stock Market Factors? Read This Paper.

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During the past few decades, newly discovered stock anomalies have been embarrassing existing factor models, such as the Fama-French 3-factor. As many readers know, each long or short "leg" of these popular long/short factor portfolios is generally constructed by ranking ...

Quantitative Momentum: A Guide to Momentum-Based Stock Selection

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The long wait is over. Our newest book--Quantitative Momentum--is finally here. After 2 years of research review, results replication, reverse engineering, internal idea generation, writing, editing, and final publication, we have a final product. We think the book will help ...

Performance figures contained herein are hypothetical, unaudited and prepared by Alpha Architect, LLC; hypothetical results are intended for illustrative purposes only. Past performance is not indicative of future results, which may vary. There is a risk of substantial loss associated with trading stocks, commodities, futures, options and other financial instruments. Please click Full Disclaimer for additional disclosures.