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Journal Article

Fact and Fiction About Low-Risk Investing

Low-risk investing has received a lot of attention over the past decade. An intensive academic debate has spurred, and been spurred by, the growing market for low-risk strategies. This article presents five fact and dispels five fictions about low-risk investing.

Working Paper

Trading Costs

Using live trade data from a large institutional money manager over a 19-year period, we find actual trading costs to be an order of magnitude smaller than previous studies suggest.

Journal Article

A Winner in the Prestigious Fama-DFA Prizes: Betting Against Correlation: Testing Theories of the Low-Risk Effect

“Betting Against Correlation: Testing Theories of the Low-Risk Effect” won second place in the Journal of Financial Economics’ 2020 Fama-DFA Prizes for Capital Markets and Asset Pricing. We test whether it's driven by leverage constraints (and thus risk should be measured using beta) or behavioral effects (and thus risk should be measured by idiosyncratic risk).

Journal Article

Deactivating Active Share

The authors investigate Active Share, a measure meant to determine the level of active management in investment portfolios, and find it wanting.

Journal Article

Fact, Fiction and Value Investing

Value investing has been a part of the investment lexicon for at least the better part of a century, yet confusion about it remains.

Journal Article

Size Matters, If You Control Your Junk

When it comes to equity investing, size matters—and in a bigger way than once thought—but only when controlling for junk. We examine seven challenges that have been hurled at the size effect and dismantle each one by controlling for a firm's quality.

Journal Article

Fact, Fiction and Momentum Investing

Momentum is the phenomenon that securities that have performed well relative to peers (winners) on average continue to outperform, and securities that have performed relatively poorly (losers) tend to continue to underperform.

Journal Article

Low-Risk Investing Without Industry Bets

The strategy of buying safe low-beta stocks while shorting (or underweighting) riskier high-beta stocks has been shown to deliver significant risk-adjusted returns.

Journal Article

Betting Against Beta

A basic premise of the capital asset pricing model (CAPM) is that all agents invest in the portfolio with the highest Sharpe ratio, or expected excess return per unit of risk, and leverage or de-leverage this portfolio to suit their risk preferences. However, many investors — such as individuals, pension funds and mutual funds — are constrained in the leverage that they can take, and therefore overweight risky securities instead.

Journal Article

Buffett's Alpha

[Winner of the CFA Institute's 2018 Graham and Dodd Award] What is the secret to Warren Buffett's success? We seek the answer via a thorough empirical analysis in light of some the latest research on the drivers of returns.