![]() ![]() This leads to irrationally high prices for expensive "glamour" stocks. Investors systemically underappreciate mean reversion in corporate earnings, and extrapolate recent earnings growth far into the future. The 'value' anomaly exists because of two behavioral biases: There are dozens of academic papers out there (see here ) that provide empirical support for this anomaly. This is the backbone for the entire religion of value investing, and has withstood the test of time remarkably well. This anomaly is pretty intuitive, buying a stock for a cheap price will lead to better returns than buying a stock for an expensive price. "Over the long-run, the returns of cheap stocks outperform expensive stocks." What are these anomalies and why do they exist? This brings us to the next important question: Both of these firms have built models that systemically exploit inefficiencies in the market, and institutional investors have responded their success by giving them huge amounts of money to manage. Another example is Josef Lakonishok, who is the founder of LSV Asset Management (manages over $89 billion in assets). For example, Cliff Asness is a prolific academic researcher, even while serving as the founder and manager of AQR Capital Management (assets under management of $122 billion). Rather than being "out of touch" with the realities of the markets, many of these academics also tend to be big-time fund managers. Unbeknownst to many retail investors, there is an abundance of academic research dedicated to the discovery and analysis of different market anomalies. Market anomalies are patterns in the markets where some groups of securities consistently generate excess returns. The best way to achieve alpha is through the systematic exploitation of market anomalies. ![]() How does one consistently generate positive alpha? ![]() Alpha is also zero-sum, in that, one investor's positive alpha is another investor's negative alpha. ![]() Alpha is the holy grail of investing, and represents risk-adjusted outperformance over the overall market (often represented by the returns of the S&P 500). This powerful, data intensive book will help you clearly see what empirically drives the market, while providing the tools to make more profitable investment decisions based on that knowledge-through both bull and bear markets.Central to its mission (and name), Seeking Alpha strives to give investors the means to achieve "alpha". Suggestions for using quantitative strategies to manage risk and for structuring your own quantitative portfoliosĪdvice on using quantitative principles to do qualitative investment research, including sample spreadsheets More than 20 proven investment screens for generating winning investment ideas This valuable work contains:Ī wide variety of investment strategies built around the seven basics that drive future stock market returns: profitability, valuation, cash flow generation, growth, capital allocation, price momentum, and red flags (risk)Ī building-block approach to quantitative analysis based on 42 single-factor and nearly 70 two- and three-factor backtests, which show the investor how to effectively combine individual factors into robust investment screens and models The result is a comprehensive investment mosaic that illustrates clearly those qualities and characteristics that make an investment attractive or unattractive. Quantitative Strategies for Achieving Alpha presents a wide variety of individual and combined investment strategies that consistently predict above-market returns. Each alpha-achieving strategy has been extensively back-tested using Standard & Poor's Compustat Point in Time database and has proven to deliver alpha over the long term. With this practical guide, you will gain an effective instrument that can be used to improve your investment process, whether you invest qualitatively, quantitatively, or seek to combine both. Quantitative Strategies for Achieving Alpha was borne from equity analyst Richard Tortoriello's efforts to create a series of quantitative stock selection models for his company, Standard & Poor's, and produce a “road map” of the market from a quantitative point of view. Achieve alpha, and you've beaten the market on a risk-adjusted basis. Alpha, higher-than-expected returns generated by an investment strategy, is the holy grail of the investment world. ![]()
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