“There is no magic answer,” says AQR’s Cliff Asness when asked when the value strategy will make a comeback, according to a recent article in Financial Review. “A huge part of our job is building a great investment process that will make money over the long term, but a fair amount of our job is sticking to it like grim death during the tougher times,” Asness said in an interview with The Australian Financial Review.… Read More
In a recent note to clients, AQR’s founder Cliff Asness asked for perseverance and forbearance as the firm slogs through a rough patch. This according to an article in Institutional Investor. “When things got rough for AQR about sixteen months ago,” the article reports, “the quantitative investment firm was closing strategies due to excess demand.” In his note, Asness explained the firm’s period of weak performance as a “tale of woe for our equity strategies”… Read More
By Justin Carbonneau (@jjcarbonneau) At the most basic level, momentum investing in the context of security selection can be defined as buying securities that have done the best over the past 12 months and selling those that have done the worst. While there are multiple methods and timeframes used to measure momentum, which we’ll get into below, the idea of buying based on price strength and selling based on price weakness is at the core… Read More
By Jack Forehand (@practicalquant) — Below are some of our favorite things we read or listened to this week and one important lesson we took from each of them. This Week’s Topics Why Factor Investing is So Hard Industry Concentration in Factor Investing Reframing the Pain of Underperformance as a Positive Article: What to do When an Investment Strategy Performs Poorly Lesson: Successful implementation of factor investing strategies requires sitting through extended periods of underperformance This… Read More
Prompted by a lackluster performance year, AQR Capital Management founder Cliff Asness wrote a 23-page essay defending his factor-based investing strategies according to a recent Bloomberg article that features an interview with the billionaire. Here are some highlights: Asness believes that there is a “minor crisis in confidence” for some quants, but that it’s misplaced. “We’ve seen periods like this quite a few times before.” He contends that his firm expects to “win long term,… Read More
A recent article in Morningstar recounts insights from AQR’s Cliff Asness on the following two questions: Can current stock valuations help predict future returns? “Probably yes,” writes Asness, “but not for the reason you think.” The article cites an AQR paper that highlights the problem with making predictions from long-term stock market figures such as the Shiller P/E ratio. The paper concludes that “without building economic structure into the modeling, there is little hope of… Read More
In a recent Bloomberg article, AQR’s Cliff Asness argues that the opinion pendulum on hedge funds has swung too far, that “all you read about today is that hedge funds are a failure and investors are fleeing.” This overreaction, he explains, comes in part from; (1) a failure to understand how to measure hedge-fund returns, and the fact that (2) the last few years have been a “mild disappointment and they have given critics enough… Read More
Cliff Asness, co-founder of AQR Capital Management, thinks the flow of money into passive investing has been a positive for the industry, according to a recent Bloomberg article. Per the article, Asness believes that active managers “have historically overcharged for scant returns and the shift toward questioning whether high fees are deserved is a healthy change.” The managing principal of Greenwich, Connecticut-based AQR (which oversees $208 billion in assets) argues that there are too many active… Read More
At the 2nd annual Evidence-Based Investing Conference earlier this month, AQR’s Cliff Asness shared his view that the expensive financial markets will offer weaker returns going forward. This according to a recent CNBC article. According to the article, Asness predicts that investors with a “balanced portfolio of stocks and bonds will only generate 2 percent real annual returns,” but warned against betting against the market. He argues that strong evidence exists indicating that high CAPE… Read More
A new study has found that most of the market anomalies academics have identified are not statistically significant, says a recent Wall Street Journal article. After analyzing 447 anomalies (the biggest test of its kind conducted so far), the researchers concluded that more than eight out of ten “vanish when rigorous tests are applied,” according to the article. In their report, they warn that academics may manipulate statistics to come up with compelling findings, a… Read More
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