Alpha Architect Research Blog

The Newest Alpha Architect Research and Insights


Magic Formula and MA Rules: A Bad Combo!

Recently, I've been investigating various risk management systems. A lot of the work we've done is beyond the scope of the blog and/or is related to things we do with our investment management business. Nonetheless, one of the most intuitive ...

Volcker Rule and Muni-Bond Liquidity–back of the envelope opinion.

Volcker Rule May Adversely Impact Munis http://www.bondbuyer.com/issues/120_225/volcker-rule-impact-munis-1033412-1.html The municipal bond market makers are making the case that eliminating prop desks will somehow decrease liquidity and screw up the market in municipal bonds. Translation: We love to rake our customers over the coals ...

Long-Term Market Return Projections

John Hussman has an interesting piece on predicting long-term market returns: http://hussmanfunds.com/wmc/wmc050222.htm The article is a bit dated (2005), but still fascinating. In the short piece Hussman suggests that the projected annual total return on the S&P 500 over T ...

Investigating Equity and Bond Allocation Models

We've been toying with models that will predict the stock market: better known as "cold fusion." There is an incredible amount of research on the subject and nobody seems to be convinced one way or the other that the market ...

Insider Trading–Congress loves it!

60 Minutes has a great segment explaining the lack of insider trading rules for Congressmen. http://www.cbsnews.com/video/watch/?id=7388130n&tag=contentBody;storyMediaBox Amazing, isn't it? You can sit on the healthcare committee, learn that the new bill will cut insurance companies profits by 99%, and short ...

Risk-Managed Momentum

Last week we discussed the possibility that "momentum is finished." Astute readers of the blog generally agreed with the concept, but also pointed out that risk management techniques can potentially save momentum strategies. Other observers--to include a Wharton finance professor ...

Momentum Finished?

CXO Advisory highlights an interesting paper with the tagline: "Momentum Not Working?" Here's the link: http://www.cxoadvisory.com/subscription-options/?wlfrom=%2F17440%2Fmomentum-investing%2Fmomentum-not-working%2F Here is the link to the source: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1951137 This work inspired me to run the Size, Value, and Momentum factors through our systems and ...

How to Use Our Dual Class Share Arbitrage Module

Recent market volatility is generating an anxiety in the investing public that is almost palpable, and many are searching for ways to generate returns while managing down their exposure to equity markets.  There are many ways to manage market risk ...

Shorting the Magic Formula

I just got back from the Value Investing Congress--http://www.valueinvestingcongress.com/. The event was exceptional and very thought-provoking. While Einhorn's annihilation of Green Mountain Coffee was impressive (here is Einhorn's theme song), and Whitney Tilson's outline of the opportunity in Berkshire Hathaway ...

Neuroeconomics Post! The Endocrine System and Shifting Risk Preferences

The Chinese philosopher Sun Tzu counseled us to "know thine enemy."  At Alpha Architect we are always curious about anything that affects our financial decision making, since we believe the enemy is often us.  Recently I did some reading about a ...

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