Asness, Clifford S., Tobias J. Moskowitz, and Lasse Heje Pedersen. “Value and Momentum Everywhere.” (2012)

Abstract We study the returns to value and momentum strategies jointly across eight diverse markets and asset classes. Finding consistent value and momentum premia in every asset class, we further find strong common factor structure among their returns. Value and momentum are more positively correlated across asset classes than passive exposures to the asset classes […]

Thurner, Stefan, J. Doyne Farmer, and John Geanakoplos. “Leverage causes fat tails and clustered volatility.” (2011)

Abstract We build a simple model of leveraged asset purchases with margin calls. Investment funds use what is perhaps the most basic financial strategy, called “value investing,” i.e., systematically attempting to buy underpriced assets. When funds do not borrow, the price fluctuations of the asset are approximately normally distributed and uncorrelated across time. This changes […]

Novy-Marx, Robert. “The other side of value: Good growth and the gross profitability premium.”(2010)

Abstract Profitability, as measured by gross profits-to-assets, has roughly the same power as book-to-market predicting the cross-section of average returns. Profitable firms generate significantly higher average returns than unprofitable firms, despite having, on average, lower book-to-markets and higher market capitalizations. Controlling for profitability also dramatically increases the performance of value strategies, especially among the largest, […]

#Build: Why There Aren’t More Googles

Why There Aren’t More Googles – April 2008 by @paulg “So what’s the real reason there aren’t more Googles? Curiously enough, it’s the same reason Google and Facebook have remained independent: money guys undervalue the most innovative startups.” — Varun (@varun_mathur) September 13, 2019

Barber, Brad M., and Terrance Odean. “All that glitters: The effect of attention and news on the buying behavior of individual and institutional investors.” (2006)

Abstract We test and confirm the hypothesis that individual investors are net buyers of attention-grabbing stocks, e.g., stocks in the news, stocks experiencing high abnormal trading volume, and stocks with extreme one day returns. Attention-driven buying results from the difficulty that investors have searching the thousands of stocks they can potentially buy. Individual investors don’t […]

Shleifer, Andrei, and Robert W. Vishny. “The limits of arbitrage.” (1995)

Abstract In traditional models, arbitrage in a given security is performed by a large number of diversified investors taking small positions against its mispricing. In reality, however, arbitrage is conducted by a relatively small number of highly specialized investors who take large positions using other people’s money. Such professional arbitrage has a number of interesting […]