11 Sep 2017

Cliff Asness Says, Fire Your Mechanic

This article was originally published on June 3, 2014.  In my humble opinion, it holds up well; although I am disappointed that value stocks still haven’t turned around more than three years later.  As much as I don’t like that fact, however, the central thesis of my article is that these strategies can underperform for long periods of time.  One of my favorite people in our industry is Cliff Asness,… Read More

11 May 2016

Do Behavioral Biases Matter?

It’s the second to last day here in Montreal and there is a recurring subject that I have noticed popping up in many of the sessions here at the conference – Behavioral Biases. In the investing world this refers to the psychology behind investor behavior and the effect that widespread decision making can have on markets. As an investor it’s important to understand them because they really do matter. First,… Read More

29 Feb 2016

Applied Investment Rigor

Barron’s cover article this weekend featured AQR, one of the fund companies that we use.  You can find the article here, but a subscription is required. The article was great, really explaining the firm and many of their processes – so much so that one of the online commenters asked, ‘what is this, an ad?’ My only disappointment was that the article really highlighted their alternative mutual funds, strategies like managed futures… Read More

26 Feb 2016

Is Value Investing Dead?

Value stocks are undoubtedly having a tough time these days.  As I first wrote last November (click here for the article), value stocks are undergoing their worst period of underperformance since the tech bubble during the late 1990s. For the 10 years ending January 31st, the Russell 1000 Value index is up 7.03 percent compared to 7.92 percent for the Russell 1000 index of large cap stocks and 8.68 percent… Read More

16 Sep 2015

The Secret Sauce Behind Value and Momentum

One of the interesting market developments so far this year is the relative performance of momentum versus value in large cap stocks. Earlier this year, I wrote a primer on each strategy (found here and here) and at the end of the momentum article, I pointed out that value and momentum work especially well together. While both strategies have enjoyed higher returns than the overall market, they do so at different times, which… Read More

21 Apr 2015

Momentum: A Moving Body in Motion

In recent weeks, I’ve written about two well known risk factors, the size premium and the value premium. Today, I’ve got a more difficult topic to cover: momentum.  Virtually everyone agrees that you can find evidence of momentum in the data, but there’s a lot of disagreement about why it exists and how it should or shouldn’t be applied in the real world. In short, momentum is the tendency for stocks that… Read More

26 Jan 2015

When a Strategy Stumbles

Last year was tough for some of our stock strategies. For example, we take a portion of our large cap portfolio and invest in ‘value’ stocks. Another, equally sized percentage is invested in a strategy that buys ‘momentum’ stocks. I’m going to oversimplify here, but value stocks can be thought of as ‘cheap’ stocks. For a stock to be cheap, the market value of a company has to be low… Read More