As I’ve discussed in the past, P/B and P/E are demonstratively useful as predictors of future stock returns, and more so when combined (see, for example, LSV’s Two-Dimensional Classifications). As Josef Lakonishok, Andrei Shleifer, and Robert Vishny showed in Contrarian Investment, Extrapolation, and Risk, within the set of firms whose B/M ratios are the highest (in other [...]
Posts Tagged ‘Quantitative’
How P/E juices P/B returns
Posted in About, Quantitative investment, Stocks, Value Investment, tagged Price-to-book Value, Quantitative, Value Investment on March 1, 2010 | 3 Comments »
Dreaming of electric sheep
Posted in About, Behavioral economics, Quantitative investment, Stocks, tagged Quant, Quantitative on February 25, 2010 | 2 Comments »
One of the most interesting ideas suggested by Ian Ayers’s book Super Crunchers is the role of humans in the implementation of a quantitative investment strategy. As we know from Andrew McAfee’s Harvard Business Review blog post, The Future of Decision Making: Less Intuition, More Evidence, and James Montier’s 2006 research report, Painting By Numbers: An Ode To Quant, in context [...]
Quantifying qualitative factors
Posted in About, Quantitative investment, Stocks, Value Investment, tagged Quant, Quantitative, Value Investment on February 23, 2010 | 7 Comments »
I’ve just finished Ian Ayres’s book Super Crunchers, which I found via Andrew McAfee’s Harvard Business Review blog post, The Future of Decision Making: Less Intuition, More Evidence (discussed in Intuition and the quantitative value investor). Super Crunchers is a more full version of James Montier’s 2006 research report, Painting By Numbers: An Ode To Quant, providing several [...]
Walking the talk: Applying back-tested investment strategies in practice
Posted in About, Behavioral economics, Contrarian investment, Liquidation Value, Net Current Asset Value, Net Quick Stocks, Quantitative investment, Stocks, Value Investment, tagged Liquidation, Liquidation Value, NCAV, Net Current Asset Value, Net Net, Net Net Stock, Net Quick Value, Quantitative, Value Investment on February 17, 2010 | 8 Comments »
Aswath Damodaran, a Professor of Finance at the Stern School of Business, has an interesting post on his blog Musings on Markets, Transaction costs and beating the market. Damodaran’s thesis is that transaction costs – broadly defined to include brokerage commissions, spread and the “price impact” of trading (which I believe is an important issue [...]
The trend is your end.
Posted in About, Behavioral economics, Quantitative investment, Stocks, Value Investment, tagged Momentum, Quantitative, Value on January 28, 2010 | 4 Comments »
In “Black box” blues I argued that automated trading was a potentially dangerous element to include in a quantitative investment strategy, citing the “program trading / portfolio insurance” crash of 1987. When the market started falling in 1987 the computer programs caused the writers of derivatives to sell on every down-tick, which some suggest exacerbated the crash. Here’s New [...]
“Black box” blues
Posted in About, Quantitative investment, Stocks, tagged Quantitative on January 26, 2010 | 6 Comments »
One of the major concerns with quantitative investing is that the “black box” running the portfolio suddenly goes Skynet and destroys the portfolio. It raises an interesting distinction between “quantitative investing” as I intend it and as it is often perceived. For many, the word “quantitative” in relation to investing suggests two potentially dangerous elements: [...]
Research comparing the performance of quantitative and qualitative hedge funds
Posted in About, Quantitative investment, Stocks, Value Investment, tagged Quantitative, Value on January 18, 2010 | 1 Comment »
Recently I’ve been laying the groundwork for a quantitative approach to value investment. The rational is as follows: simple quantitative or statistical models outperform experts in a variety of disciplines, so why not investing in general, and why not value investing in specific? Well, it seems that they do. A new research paper argues that quantitative [...]
Intuition and the quantitative value investor
Posted in About, Quantitative investment, Stocks, Value Investment, tagged Quantitative, Value investing on January 14, 2010 | 11 Comments »
The rationale for a quantitative approach to investing was first described by James Montier in his 2006 research report Painting By Numbers: An Ode To Quant: Simple statistical models outperform the judgements of the best experts Simple statistical models outperform the judgements of the best experts, even when those experts are given access to the simple statistical [...]
What Montier’s Painting by Numbers can offer to value investors
Posted in About, Stocks, Value Investment, tagged James Montier, Quant, Quantitative, Value Investment on December 22, 2009 | 13 Comments »
In his 2006 research report Painting By Numbers: An Ode To Quant (via The Hedge Fund Journal) James Montier presents a compelling argument for a quantitative approach to investing. Montier’s thesis is that simple statistical or quantitative models consistently outperform expert judgements. This phenomenon continues even when the experts are provided with the models’ predictions. Montier argues [...]
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