Alpha Architect Blog
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Established in 2010, Alpha Architect champions investor empowerment through education. As a research-driven asset management firm, they prioritize high-conviction value and momentum factor exposures. Guided by the principles of behavioural finance, their systematic approach to value investing underscores their commitment to empowering investors.
Alpha Architect Blog
3h ago
Options have a bad reputation, and for good reason. After all, our friends at Wall Street Bets have taken over and turned the options market into a casino. But just like options can be used for gambling, they can also be used to structure risk and formulate payoffs that have the potential to reduce risk at the portfolio level. In fact, options are one of the best tools at our disposal to manage portfolio risk, if used correctly.
Options 101: Understanding Options Basics was originally published at Alpha Architect. Please read the Alpha Architect disclosures at your convenience ..read more
Alpha Architect Blog
3d ago
This study offers valuable information to provide insights into the underlying mechanisms driving investment behavior. For example, recognizing the impact of Neuroticism on belief formation and risk perception can help explain why some investors exhibit greater aversion to stock market volatility. Similarly, understanding how Openness influences risk preferences can shed light on why certain individuals are more willing to take investment risks than others.
Personality Differences and Investment Decision-Making was originally published at Alpha Architect. Please read the Alpha Architect disclo ..read more
Alpha Architect Blog
5d ago
The benefits of diversification are well known. In fact, it’s been called the only free lunch in investing. Investors who seek to benefit from diversification of the sources of risk and return of their portfolios must accept that adding unique sources of risk means that their portfolio will inevitably experience what is called tracking error—a financial term used as a measure of the performance of a portfolio relative to the performance of a benchmark, such as the S&P 500.
Tracking Error is a Feature, Not a Bug was originally published at Alpha Architect. Please read the Alpha Architect di ..read more
Alpha Architect Blog
1w ago
Our analysis highlights the importance of short campaigns for understanding the economic impact of activist hedge funds.
Short Campaigns by Hedge Funds was originally published at Alpha Architect. Please read the Alpha Architect disclosures at your convenience ..read more
Alpha Architect Blog
1w ago
In their two papers, Goulding, Harvey, and Mazzoleni showed that observed market corrections and rebounds carry predictive information about subsequent returns and showed how that information could be utilized to enhance the performance of trend-following strategies by dynamically blending slow and fast momentum strategies based on four-state cycle-conditional information.
Breaking Bad Momentum Trends was originally published at Alpha Architect. Please read the Alpha Architect disclosures at your convenience ..read more
Alpha Architect Blog
2w ago
When investors have a concentrated stock position that has performed well, they eventually face the same tough question: Should they continue to hold the position (and the outsized exposure it brings to their portfolio) or diversify – and face significant capital gains taxes?
Exchange Funds 2.0: A Newly Accessible Way to Diversify Concentrated Positions was originally published at Alpha Architect. Please read the Alpha Architect disclosures at your convenience ..read more
Alpha Architect Blog
2w ago
Short squeezes are often associated with a large positive jump in the price of a stock. Filippou, Garcia-Ares, and Zapatero demonstrated that skewness-seeking investors try to identify securities that could experience a short squeeze in the near future and are willing to pay a premium for them. That results in an overvaluation of the options and, on average, negative returns. Investors are best served to avoid investments with lottery-like distributions. One way to do that is to turn a blind eye to social media sites like Robinhood and Reddit so you don’t get caught up in the hype and exciteme ..read more
Alpha Architect Blog
3w ago
Along with the rapid growth in the utilization of robo-advisors, there has been similar growth in academic interest about robo-advisors. What is the current state and what are the main research streams in the literature?
Robo-advisors: A well-researched topic was originally published at Alpha Architect. Please read the Alpha Architect disclosures at your convenience ..read more
Alpha Architect Blog
3w ago
Full exposure to domestic equities.
Full exposure to international equities.
Partial exposure to REITs.
No exposure to commodities.
Partial exposure to intermediate-term bonds.
DIY Trend-Following Allocations: March 2024 was originally published at Alpha Architect. Please read the Alpha Architect disclosures at your convenience ..read more
Alpha Architect Blog
3w ago
Be careful before acting on what is considered to be conventional wisdom. Make sure it’s supported by empirical evidence. In this case, the evidence makes clear that “cut your losses and let your profits run” should not be conventional wisdom.
Cut Your Losses and Let Profits Run? was originally published at Alpha Architect. Please read the Alpha Architect disclosures at your convenience ..read more