Quant Mashup - Systematic Relative Strength Momentum & Value vs. Growth & Value [Systematic Relative Strength]At Dorsey Wright, we believe momentum can be used as a stand-alone investment strategy, however, combining it with other smart beta factors to which momentum is negatively correlated has its advantages. We have referenced this in previous blog posts, noting that it allows for a portfolio to capture(...) Combining Different Momentum Factors [Systematic Relative Strength]Momentum can be calculated in a number of different ways. As long as you are measuring the strength of price appreciation over an intermediate time horizon most logical calculation methods will work to one degree or another. The standard, academic definition of momentum usually means taking the(...) Manage Your Luck [Systematic Relative Strength]There is a lot more luck involved in investing than people think. I’m not saying there isn’t skill involved in investing or that there aren’t ways to outperform the market over time. Even if you have a process that can be shown to outperform the market over long time periods, there can be a(...) What's All The Fuss About [Systematic Relative Strength]If you own last year’s laggards you are probably wondering what all the fuss over the market is about. It has been tough sledding for the leaders so far this year as they have underperformed the laggards by quite a bit. In one of the models we track, the laggards moved in to positive territory(...) In Search of Sustained Success [Systematic Relative Strength]How do you rate an NBA team across a decade of play? One method is “Elo,” a simple measure of strength calculated by game-by-game results (Source: Nate Silver’s FiveThirtyEight). A description of Elo is below: Elo ratings have a simple formula; the only inputs are the final score of each game,(...) Buy the Winners [Systematic Relative Strength]People come up with all kinds of reasons not to buy stocks with strong momentum. Some of the most common reasons that I hear: Stocks with high momentum are risky Stocks with high momentum are overvalued Stocks with high momentum are susceptible to reversals As for the first point, yes, buying stocks(...) Relative Strength and Dividend Investing [Systematic Relative Strength]The portfolio manager of a large, active dividend fund was recently interviewed by Morningstar. (“What Active Management Can Bring To Dividend Investing” http://www.morningstar.com/cover/videocenter.aspx?id=716392). The portfolio manager argues that simply looking for stocks with high dividend(...) Momentum Environments [Systematic Relative Strength]How consistent are Momentum returns? This is among the most frequently asked questions about Momentum (and about any investment strategy for that matter). One way to answer this question is to look at the following table from a white paper published by RBC Capital Markets. According to their(...) Sector Rotation with PnF Matricies [Systematic Relative Strength]Watering the flowers and pulling the weeds. Letting your winners run and cutting your losers short. There are different expressions for sector rotation, but it is among the most profitable investment strategies we have found, when done in a disciplined way. Sector rotation is based on the idea that(...) Market Timing vs. Global Tactical Allocation [Systematic Relative Strength]Where Do Stocks Go From Here? After six years of virtually uninterrupted gains, people are wondering where we go from here. Stocks are up more than 200% over the last six years which is the best six-year run since the tech bubble. Looking at the chart, we see that we are well above the 85%(...) Marketing Timing with CAPE [Systematic Relative Strength]How worried should you be when you hear someone say that the market is overvalued? Wesley Gray at Alpha Architect takes a deep dive into the topic of timing the market using CAPE, Shiller’s Cyclically Adjusted PE ratio in a recent post. His results should give pause to even he most strident market(...)