Aqr's Momentum Funds (a) Essays

DFA’s investment strategy is based on their belief in the principle that stock market is efficient. They attempt to match a broad-based, value-weighted small-stock index and position themselves in the market as a passive fund manager that still claimed to add value by capturing specific dimensions of risks identified by financial science. DFA’s investment strategy incorporates elements of both passive and active management. It is passive in the sense that like many other index managers, it focuses on the importance of diversification, lower turnover and lower fees than actively managed portfolios. It is active in the sense that it develops its small-value stock focus based on academic research and uses certain techniques (such as

The authors jointly examine momentum and value in eight different markets and asset classes. Asness, Moskowitz and Pederson found two main phenomena associated with returns across 8 various markets and asset classes in their research. These findings challenge previous, well-established theories, like the existence of significant premia in value and momentum return strategies across asset classes and global markets. This innovative research includes some new asset classes not previously used, such as government bonds, currencies, and commodities. The authors look to prove the

In February 1995, Adam Bain, investment advisor in the London, Ontario branch of RBC Dominion Securities Inc. (RBC DS), was considering whether or not to implement a price momentum strategy for his clients. Trend and Cycle, DS’s technical research department, had recently circulated a copy of a study which described a simple price momentum model and referred to its “startling results” based on back testing the strategy over a 15 year period. The Trend and Cycle group had long promoted the importance of price momentum and relative strength to potential clients. Bain needs to determine whether the proposed model was “too good to be true” or, if it did not look promising, how he would go about

In this project, the research on Kirkland`s and Pier 1 Imports company has been done on their financial Ratio and of the company`s available current financial data. Kirkland`s is a marketing chain that sells home décor. Pier 1 Imports focus on traded home furnishings and décor mostly furniture, table top items, decorative accessories and seasonal décor. During this project I would be also compare the company’s financial analysis, cost of capital and the history reports.

The interest rate of a term deposit is at 5.2% per annum. Available investment fund is $200,000. Term Deposit will yield $10,400 p.a. by using $200,000 multiply by 5.2%. However, for compounded interest rate, 5 years investment will be $257,697 (ROI = $57,697). And 10 years investment will be $332,038 (ROI = $132,038), assume that the interest rate is constant within 10 years period. The risk is considered minimal.

Who doesn't want to make money? Everyone right? An American Hedge Fund is a great read for all those who want to be successful in life because it shows you how to think smarter, along with what is achievable with money (which is the most important thing on earth). This book, written by Timothy Sykes, shows the ease of becoming a self made millionaire, if you are motivated to do so. Timothy Sykes began his millionaire conquest at the age of 14 where he gained interest in the stock market. By his freshman year in college he figured out a way to determine a pattern for stocks fluctuating prices. His pattern allowed him to buy and sell stocks making huge gains and minimal loses. After his new profound wealth, it made him realize, “for better or

Watching a stock portfolio to appreciate precisely when a profit opportunity is available, but be ready to return to a desired pattern, keeps your portfolio in line with your ambitions. It accomplishes this by also being flexible at the perfect moment to sense a good opportunity and take advantage of it

The vanguard equity income fund-investor (VEIF-Inv) is an active managed equity fund which is available to investors who meets the minimum purchase amount requirement (3,000 dollars). Its inception date is 21st March, 1988, and its ticker symbol is VEIPX. VEIF-Inv has used the spliced benchmark index: Russell 1000 Value Index through July 31, 2007; FTSE High Dividend Yield Index thereafter.

A strategy that I have used during the Sifma Stock Market Game is a strategy called, “value investing.” From the research I have conducted, I have learned that value investing is a very popular long term investing strategy where one buys a stock that is believed to be “undervalued”, and hold that stock until it reaches its true value. There are many well-known investors who are known to use this strategy, a few investors who follow this strategy include Warren Buffett, Benjamin Graham, and Seth Klarman. With this in mind, it is good to know that this is one of the top investing strategies and has been for a very long time.

There are a lot of paths a person can take when it comes to investing. The stock market offers thousands of opportunities with more than 7,000 stocks to invest in. While there are perks to short-term investments, long-term ones typically offer a set of advantages that a day-trade can't provide. The Motley Fool cites nine unique beneficial factors long-term investments have to offer.

Although CastleKeep’s Low PE portfolio has outperformed the market in the past, recent performance has not been satisfactory: a cumulative 20.57% gain over the S&P 500 from 8/27/2012 to 10/1/2015 has become 6.37% of underperformance as of 5/31/2017. Further, the portfolio experiences significant fluctuations in its number of holdings. In the nine months from 8/29/2016 to 5/31/2017, the portfolio grew from 17 stocks to a high of 102 companies in April. To improve performance and limit both the number of stocks in the portfolio and the size of fluctuations in holdings, I tested five different changes to the Low PE strategy.

“…anointing winners and losers on the basis of 12 months’ worth of performance is silly in the context of portfolios that are being managed with incredibly long time horizons.” — David F. Swensen, Chief Investment Officer, Yale University1

In order to analyze the momentum effect of different specifications, stocks were divided into ‘winner’ stocks and ‘loser’ stocks according to their rankings.

The success of the model is attributed to Yale’s ability to combine both quantitative analysis (mean-variance analysis) with market judgments to structure its portfolio. In addition, Yale also uses statistical analysis to actively test their models with factors affecting the market, therefore understanding the sensitivity of their portfolio in response to various market changes. Yale also follows and forecasts the cash flow of private equity and real assets in its portfolio to decide the need for hedging.

Even though there are flaws in the CAPM for empirical study, the approach of the linearity of expected return and risk is readily relevant. As Fama & French (2004:20) stated “… Markowitz’s portfolio model … is nevertheless a theoretical tour de force.” It could be seen that the study of this paper may possibly justify Fama & French’s study that stated the CAPM is insufficient in interpreting the expected return with respect to risk. This is due to the failure of considering the other market factors that would affect the stock price.