Thirty years ago, I wrote my dissertation on the low-vol effect, which was really bad timing. This was just after various anomalies highlighted in the 70s and 80s were exposed as the effects of measurement error and selection bias (the low-price effect, the January effect). The small-cap effect was

About half of Robeco’s Quantitative Investing team recently published a short paper on monthly trading strategies (see Blitz et everybody Beyond Fama-French Factors: Alpha from Short-Term Signals Frequencies). I can imagine these guys talking about this stuff all the time, and someone finally

I am not a fan of most equity factors, but if any equity factor exists, it is the value factor. Graham and Dodd, Warren Buffet, Fama and French have all highlighted value as an investment strategy. Its essence is the ratio of a backward-looking accounting value vs. a forward-looking discounting of

In this video snippet, Freeman Dyson talks about an experience he had with Enrico Fermi in 1951. Dyson was originally a mathematician who had just shown how two different formulations of quantum electrodynamics (QED), Feynman diagrams and Schwinger-Tomonoga's operator method, were equivalent.

The conventional academic corporate bond puzzle has been that 'risky' bonds generate too high a return premium (see here). The most conspicuous credit metric captures US BBB and AAA bond yields going back to 1919 (Moody's calls them Baa and Aaa). This generates enough data to make it

While short-term asset returns are unpredictable, volatility is highly predictable theoretically and practically. The VIX index is a forward-looking estimate of volatility based on index option prices. Though introduced in 1992 it has been calculated back to 1986, because when released they wanted

Factor returns should reflect risk, in that they have traditionally been interpreted as proxies for some kind of risk not measured by beta. The idea is that perhaps what people really care about is whether there will be another oil shock, and nothing matters as much. Stocks that have a high

When I was in graduate school at Northwestern in the early 90s the hot financial topics were all related to finding and estimating risk factors: Arbitrage Pricing Theory via latent factors (Connor and Koraczyk 1986), Kalman filter state-space models (eg, Stock and Watson 1989), and method of moment

I was interested in calculating what the portfolio volatility would be for a portfolio given various correlation assumptions, and also the number of assets. So I took two portfolio of the S&P500 in two very different years: 2008 and 2017. The VIX had one of its highest average levels in 2008, at

BitMEX offers swaps that make it easy to lever a long or short bitcoin (BTC) and ether (ETH). The main reason it trades so much is that they are based outside of US or EU control in the little archipelago-nation of Seychelles, and also that it transacts only in Bitcoin. This combination makes it

In Nassim Taleb’ book Antifragile he emphasizes that ‘if you see a fraud and do not say fraud, you are a fraud,’ I am thus compelled to note that Antifragile is a fraud because its theme is based on intentional misdirection. The most conspicuous and popular examples he presents are also

Pim van Vliet posted a link to my 1994 dissertation, noting it was an early documentation of the low-vol effect. One may wonder, why did this early evidence fall flat? Clearly, lots of things, but I'll try to highlight the keys. Here's my lead paragraph, which makes clear I saw the low vol

My book The Missing Risk Premium is a steal at only $15, but my first book, Finding Alpha, is a $65, which is a bit much for anyone not expensing their books. Finding Alpha goes over why the current asset pricing model fails, with lots of evidence, explains why economists still like it, and then in