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Quantitative Value Research: Low P/E
For the next 30-60 days we’ll be posting a recap research report on classic research related to quantitative value investing. This is the first part of the series. Stay tuned for a whole lot more!...
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Quantitative Value Research: Cyclically-adjusted P/E (CAPE) Factor
Stock Prices, Earnings, and Expected Dividends Campbell and Shiller A version of the paper can be found here. Want a summary of academic papers with alpha? Check out our Academic Research Recap...
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Quantitative Value Research: E/P or Size Effect?
Earnings Yields, Market Values, and Stock Returns Jaffe, Keim and Westerfield A version of the paper can be found here. Want a summary of academic papers with alpha? Check out our Academic Research...
View ArticleHow to calculate 3-factor (Fama-French) and 1-factor (CAPM) alpha
We’ve had a few questions related to 3-Factor Fama-French and 1-Factor (CAPM) alpha calculations recently (maybe it is midterm season?) We’re here to help! Below is a an old video (note the...
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Quantitative Value Research: Cyclically-adjusted B/M (CA-BM) Factor
On the Performance of Cyclically Adjusted Valuation Measures Gray and Vogel A version of the paper can be found here. Want a summary of academic papers with alpha? Check out our Academic Research Recap...
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Backtesting 13 AAII Value Strategies: What Wins?
Does Complexity Imply Value? AAII Value Strategies from 1963 to 2013 Gray, Vogel, and Xu A version of the paper can be found here. Want a summary of academic papers with alpha? Check out our Academic...
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Digging into the Enterprise Multiple Factor
New Evidence on the Relation Between the Enterprise Multiple and Average Stock Returns Loughran and Wellman A version of the paper can be found here. (Also described in a much more entertaining fashion...
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Quantitative Value Research: A Summary of Various Value Metrics!
Analyzing Valuation Measures: A Performance Horse-Race Over the Past 40 Years Gray and Vogel A version of the paper can be found here and here. Want a summary of academic papers with alpha? Check out...
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Quantitative Value Research: Weighted P/E Bracket
Decomposing the Price-Earning Ratio Anderson and Brooks A version of the paper can be found here. Want a summary of academic papers with alpha? Check out our Academic Research Recap Category. Abstract:...
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Face-ripping Drawdowns and the Magic Formula
Due to a surge of interest from our “Long Cheap; Short Expensive. Buyer Beware” post, we decided to analyze the impact of changing the net exposure of the Magic Formula Long/Short portfolio (and of...
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Quantitative Value Research: Long-term P/E Ratio
The Long-Term Price-Earnings Ratio Anderson and Brooks A version of the paper can be found here. Want a summary of academic papers with alpha? Check out our Academic Research Recap Category. Abstract:...
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Quantitative Value Research: NCAV/MV Factor
Testing Benjamin Graham’s Net Current Asset Value Strategy in London Xiao and Arnold A version of the paper can be found here. Want a summary of academic papers with alpha? Check out our Academic...
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Mission Impossible: Beating the Market Forever
Mission Impossible: Beating the Market Forever Author: Wesley Gray, PhD This is an article I did for CFA Institute and an update on an old piece we did a few years ago. The remarkable fact is that...
View ArticleChatting Quant Value @ Wharton Today–Business Radio
http://businessradio.wharton.upenn.edu/programs/behind-the-markets-with-jeremy-siegel/ I’ll be chatting with the “Jeremys” on Sirius Radio on Business Radio Channel 111. @ 1pm EST Hosts Jeremy Siegel...
View ArticleQuant Value $19.99 Book Deal is Over
Wow. We blew out 300+ books in a few weeks. There are a lot more quant geeks out there than I originally suspected. Holy mackerel! Thanks for all the support and we hope you enjoy Quantitative Value....
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Oil Stocks: A Real-Time Case Study in Value Investing
I just took a snapshot of the front page of Yahoo Finance, CNBC.com, and Bloomberg.com: Bloomberg.com @ 1725 EST CNBC.com @ 1725 EST Finance.Yahoo.com @ 1725 EST WHO WOULD EVER BUY AN OIL STOCK???...
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Value Investing: Digging Manager Graveyards Since 1900.
Following value strategies can be hazardous to one’s wealth in the short run. Oil stocks are a great example of the challenge value investors face: The stocks are down big–and getting cheaper–but could...
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Shareholder Yield: Do longer-term calculations enhance performance?
Wes and I have a recent paper (found here) which examines a more complete measure of shareholder yield (dividends, net stock repurchases, and debt reduction). Here is the abstract: High-dividend-yield...
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How to Create a Tax-Efficient DIY Long/Short Hedge Fund
Bad News: The market current offers long/short equity exposure that is expensive, tax-inefficient, opaque, and the underlying process is often questionable. Good News: We’ve created a Do-It-Yourself...
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Why Indexing and “Smart Beta” Are So Popular
Asset Manager Contracts and Equilibrium Prices Buffa, Vayanos, and Woolley (2014) A version of the paper can be found here. Want a summary of academic papers with alpha? Check out our Academic Research...
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Where are the Cheap Firms?
Energy (mostly oil-related) and consumer discretionary (brick & mortar retailers). Cheap–or at least relatively cheap–based on enterprise multiples. The post Where are the Cheap Firms? appeared...
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Where are the Cheap Firms Internationally?
Last week, Wes had a short post entitled, Where are the Cheap Firms? The post showed that when we look at the cheapest stocks in the U.S. stock market, we see that a few industries predominate today,...
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Value Investing Fund Assessment: The Incorrect Approach
US News laundry lists their top 10 “Value Investing Funds,” or Value Investing ETFs, in their recent article: http://money.usnews.com/funds/etfs/rankings/value-funds The criteria (and weighting) for...
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Market Valuations based on CAPE–A Deeper Dive
We have discussed market valuations in the past, but the issue of market valuations was recently raised on CNBC, when Robert Shiller suggested he may shift out of the US and buy Europe. When Shiller...
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Timing Value and Momentum with Valuation-Spreads
We were recently passed along an article suggesting that valuation spreads, or the spread in a valuation metric across the most expensive and least expensive stocks, matters for timing investments. We...
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Which Value Investing Metrics Should You Trust?
Barry has a nice piece in the Washington Post asking a simple question: What is the best valuation metric to assess if a stock is cheap or expensive? Jack and I were honored to see that Barry...
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How Rebalancing Frequency Affects Quality and Value investing funds
Rebalance frequency affects value and quality factors in different ways: Value works better when assessed more frequently Quality factors work about the same, regardless of frequently. Other important...
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Investing in High Dividend Yield Stocks: a Sucker Bet?
Beware of focusing an investment decision on “yield.” In this piece we want to highlight that investing in high dividend yield stocks–without considering the valuation–is probably a BAD idea. We’ve...
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How to Combine Value and Momentum Investing Strategies (Part 1/2)
We are probably most well known for our quantitative value investing strategies. The heart of our strategy is detailed in Wes’ book, Quantitative Value (a reader’s digest version is here). In the...
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Tactical Asset Allocation with Market Valuations: Magic of Myth?
Executive Summary Although it has been very difficult to overcome our initial skepticism, we’ve finally accepted the notion that simple technical analysis may serve as an effective way to manage risk...
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Attention Value Investors: How to Predict Accounting Trickery
Predicting Material Accounting Misstatements Dechow, Ge, Larson and Sloan A version of the paper can be found here. Want a summary of academic papers with alpha? Check out our Academic Research Recap...
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Are Value Investing and Momentum Investing Robust Anomalies?
Beating a Dead Horse: Value investing and momentum investing work At this stage in our lives we’ve essentially memorized the CRSP/Compustat database. Name an anomaly and we can probably tell you the...
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The Most Important Decision When Selecting a Value Investing Fund
The Best Investment with the Worst Performance We are huge believers in value investing. I personally started off as a fundamental value guy, spending twenty-plus years trying to pick stocks. I...
View ArticleValue Investing: 2014 Value Stock Research Recap
The success and failure of value investing can be boiled down into two components: Buy Cheap Stuff Avoid Behavioral Bias Buy Cheap Stuff Ben Graham outlined the first point in his 1976 article...
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International Value Investing: Looks Like a Reasonable Bet
A Value Investing Premium, Everywhere? A rich body of literature has shown that value investing, or buying stocks that are “cheap” based on a variety of valuation metrics, is robust across different...
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Is Passive Perfect? High Active Share Long-Term Investing Works Better
Patient Capital Outperformance Cremers and Pareek A version of the paper can be found here. Want a summary of academic papers with alpha? Check out our Academic Research Recap Category. Abstract: This...
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Book Review – Competition Demystified: a Radically Simplified Approach to...
We’ve spent a lot of time these days thinking about how to identify economic moat, or a firm’s ability to defend against competitive forces in the marketplace. In our search for better understanding we...
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Using Profitability as a Factor? Perhaps You Should Think Twice…
Many investors are getting excited about the so-called “profitability factor,” originally posed by Novy-Marx (here is an alternative story) . Larry Swedroe has a high-level piece advocating the concept...
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High Dividend Stocks and Value Investing
Barron’s recently ran an article (written by Research Affiliates), which is titled “Get Smart About Picking Dividend-Rich Stocks.” The article highlights that high-quality high-dividend-paying stocks...
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How to Make Money in Markets: Understanding Expectation Errors
A new working paper from Gennaili, Ma, and the one-the-only Andrei Shleifer. Expectations and Investment Using micro data from Duke University quarterly survey of Chief Financial Officers, we show that...
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Value Investing Research: O-Score and Distress Risk
Book-to-Market Equity, Distress Risk, and Stock Returns, by Griffin and Lemmon (2002 Journal of Finance) investigate the relationship between value premiums and distress risk. There are two schools of...
View ArticleBen Carlson on Active Investing, Value Investing, and Garage Sales
Yesterday we posted a review on Ben’s new book, A Wealth of Common Sense. We reached out to Ben and conducted a follow up Q&A. — Ben, in your book, you talk a lot about simplicity and minimizing...
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A Live Lesson in Value-Investing: The Energy Meltdown
We sat down and did a quick and dirty analysis of the S&P sector ETFs on a YTD basis and over the past 2 months. Here are the sector portfolios we used for our analysis: XLE Energy XLF Financials...
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Expensive Junk Stocks are Killing High-Quality Value Stocks, YTD
In general, investors focused on affordable stocks with strong fundamentals have been taken to the cleaners year-to-date. Meanwhile, expensive stocks with poor fundamentals have been rocking! Some...
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Private Equity Replication with Leveraged Small-Cap Value Stocks
Of the major asset classes, private equity has recently had the best absolute returns. According to Cambridge Associates, the 25-year return on private equity was 13.5%, relative to 9.75% for the...
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Value Investing in a Honda Civic–and proud of it…
Last week I had the privilege of being on CNBC to talk about value investing. A big shout out to Josh Brown, who introduced me to the Halftime Report producer. (video is below). Obviously, being on TV...
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Value Investing Research: Simple Methods to Improve the Piotroski F-Score
This article was posted on AAII.com. Click here to read the original version. I’ll be speaking at the 2015 AAII Investor Conference this fall; go to www.aaii.com/conference for more details. Executive...
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The Quantitative Value Investing Philosophy
The Quantitative Value Investing Philosophy Buy the Cheapest, Highest Quality Value Stocks Author: Wesley R. Gray, Ph.D. PDF version Executive Summary: Benjamin Graham, who first established the idea...
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Value Investing: Never Buy Expensive Stocks. Period.
We did a recent internal simulation study on the performance of cheap and expensive stocks based on a variety of valuation metrics. We looked at all our favorites from our JPM paper “Analyzing...
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Mixing Momentum and Value: A Winning Combination?
Combining Value and Momentum Fisher, Shah and Titman (2014) A version of the paper can be found here. Want a summary of academic papers with alpha? Check out our Academic Research Recap Category!...
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