Justin and I submitted a paper for the NAAIM Wagner 2016 competition.  Unfortunately, it didn't place.  The good news is that we can share it with everyone that much earlier!

The paper is about trying to time factor premiums using the same behavioral biases that we believe cause them.  Here is the abstract:

When outperformance fixation
leads to large inflow temptation:
premiums erode,
investors unload,
enabling factor rotation!

 

Our big takeaways:

  • Before trading costs, applying momentum and value approaches to factors themselves appears to generate excess return.
  • The approach does not work when anti-factors (e.g. buy expensive stocks) are introduced.
  • The excess return generated is pretty small: you're likely better off just holding a diversified set of factors.

 

You can download the paper here.

Corey is co-founder and Chief Investment Officer of Newfound Research, a quantitative asset manager offering a suite of separately managed accounts and mutual funds. At Newfound, Corey is responsible for portfolio management, investment research, strategy development, and communication of the firm's views to clients.

Prior to offering asset management services, Newfound licensed research from the quantitative investment models developed by Corey. At peak, this research helped steer the tactical allocation decisions for upwards of $10bn.

Corey is a frequent speaker on industry panels and contributes to ETF.com, ETF Trends, and Forbes.com’s Great Speculations blog. He was named a 2014 ETF All Star by ETF.com.

Corey holds a Master of Science in Computational Finance from Carnegie Mellon University and a Bachelor of Science in Computer Science, cum laude, from Cornell University.Connect on LinkedIn or Twitter.