The August of Our Discontent

Topics - Macroeconomics Equities Factor/Style Investing Market Risk and Efficiency

${ numberSection } ${ text }
The August of Our Discontent

AQR Working Paper

The author notes "some significant turmoil in the normally rather staid world of quantitative investing" at the time the article was written. He added that the turmoil led to a lot of questions about quant investing in general and specific questions about what happened in the few weeks of late July through mid-August of 2008. "In an effort to help," the author wrote, "we’ve tried to assemble and answer many of the questions or statements we’ve heard — from the subtle and insightful to the silly."

In the author's view, cheap companies with high-quality earnings and improving prices and fundamentals are still going to beat their counterparts over the long term. As for now, substantial money has left the strategy (through deleveraging) and value spreads are above historic norms, both of which the author said were positive for the medium-term. However, short-term investors may view the strategy as riskier than it used to be, which could cause further reductions in positions. "We are not in the business of predicting the short-term," the author wrote.

"But," he adds, "to be doing the same strategies we’ve done for years (albeit using today’s versions which we think are better than in the past) at wider spreads and with fewer competitors makes us fairly excited about the medium-term prospects, and much more excited than we’ve been in quite a while."

Published In

Alternative Investment Analyst Review

AQR Capital Management, LLC, (“AQR”) provide links to third-party websites only as a convenience, and the inclusion of such links does not imply any endorsement, approval, investigation, verification or monitoring by us of any content or information contained within or accessible from the linked sites. If you choose to visit the linked sites, you do so at your own risk, and you will be subject to such sites' terms of use and privacy policies, over which has no control. In no event will AQR be responsible for any information or content within the linked sites or your use of the linked sites.

The information contained herein is only as current as of the date indicated, and may be superseded by subsequent market events or for other reasons. The views and opinions expressed herein are those of the author and do not necessarily reflect the views of AQR Capital Management, LLC, its affiliates or its employees. This information is not intended to, and does not relate specifically to any investment strategy or product that AQR offers. It is being provided merely to provide a framework to assist in the implementation of an investor’s own analysis and an investor’s own view on the topic discussed herein. Past performance is not a guarantee of future results.


Hypothetical performance results have many inherent limitations, some of which, but not all, are described herein. The hypothetical performance shown was derived from the retroactive application of a model developed with the benefit of hindsight.  Hypothetical performance results are presented for illustrative purposes only.


Diversification does not eliminate the risk of experiencing investment loss.


Certain publications may have been written prior to the author being an employee of AQR.

This material is intended for informational purposes only and should not be construed as legal or tax advice, nor is it intended to replace the advice of a qualified attorney or tax advisor.


AQR Capital Management is a global investment management firm, which may or may not apply similar investment techniques or methods of analysis as described herein. The views expressed here are those of the authors and not necessarily those of AQR.