This paper rethinks how financial regulators should design stress tests. Rather than treating stress testing as a pass/fail assessment, the authors show it should be viewed as an exercise in information gathering. Designing Risk Scenarios was originally published at Alpha Architect. Please read the Alpha Architect disclosures at your convenience.| Alpha Architect
Buffer ETFs have moved from niche idea to mainstream product in just a few years. That’s not just growth—it’s a trend! But what’s behind it? Are buffer ETFs a breakthrough in risk management… or are they more complex and potentially riskier than they appear? How Buffer ETFs Promise to Protect You (and Why They Can’t Do It All) was originally published at Alpha Architect. Please read the Alpha Architect disclosures at your convenience.| Alpha Architect
Rather than streamlining oversight, overlapping mandates between regulatory agencies create confusion, redundancy, and sometimes outright inconsistency. Regulatory fragmentation drags down efficiency. was originally published at Alpha Architect. Please read the Alpha Architect disclosures at your convenience.| Alpha Architect
Letdin, Seagraves, and Sirmans advanced our understanding of REIT asset pricing by developing and rigorously testing six REIT-specific return factors—size, value, momentum, earnings quality, low volatility, and short-term reversal—using decades of data. Unlocking REIT Returns: Real Estate Investment Factors was originally published at Alpha Architect. Please read the Alpha Architect disclosures at your convenience.| Alpha Architect
A longstanding belief in market finance is that short-term funding markets like repo are relatively stable and transparent. But this new research turns that idea on its head. Leverage is dangerous if you can’t borrow in a crisis was originally published at Alpha Architect. Please read the Alpha Architect disclosures at your convenience.| Alpha Architect
Investors care about more than just returns. They also care about risk. Thus, prudent investors include consideration of strategies that can provide at least some protection against adverse events that lead to left tail risk (portfolios crashing). The cost of that protection (the impact on expected returns) must play an important role in deciding whether to include them. For example, buying at-the-money puts, a strategy that eliminates downside risk, should have returns no better than the ris...| Alpha Architect
The reported results we covered have important implications for investors in terms of portfolio construction, risk monitoring, and manager selection. Because these common factors explain almost all the returns of bond portfolios, investors should construct their bond portfolios using low-cost, passively (systematically) managed funds with these factors in mind and then carefully monitor their exposure to these systematic risks.| Alpha Architect
This paper explores how value, momentum, low-risk, and size factors explain differences in corporate bond returns across firms and over time.| Alpha Architect
Yield. Within almost any asset class, investors want to know, what is the "yield" on the investment? For some investors, this is the most important and only s| Alpha Architect
Watch the video version of this blog here:https://www.youtube.com/watch?v=DuYQfktwQZg&t=236sDividends are the comfort food of investing. Who wouldn’t love feeling like they’re getting a seemingly “free” payout just for holding onto a stock?| Alpha Architect
Younger and less-wealthy individuals are more prone to increasing their exposure to riskier assets in low-interest environments. Investors experiencing losses are more likely to seek higher yields.| Alpha Architect
The empirical research (for example, here, here, here and here) on insider trading demonstrates that insider transactions have significant predictive power for| Alpha Architect
Over 75% of the cross-sectional variation in P/E ratios is driven by future return differences, not growth expectations. This challenges many common asset pricing models and changes how investors should think about value, growth, and long-term return forecasting.| Alpha Architect
1. IntroductionA previous article, “Trend-Following Filters – Part 7” , examined several digital filters, commonly used by technical analysts to aid in making trading decisions, from a digital signal processing (DSP) time domain perspective.| Alpha Architect
In his 2012 paper “The Other Side of Value: The Gross Profitability Premium,” Robert Novy-Marx demonstrated that profitability, as measured by gross profits-to-assets, had roughly the same power as book-to-market (value factor) in predicting the cross-section of average returns - profitable firms generated significantly higher returns than unprofitable firms despite having significantly higher valuation ratios.| Alpha Architect
While the quality factor has been identified in the literature (including papers such as “Buffett’s Alpha,” “Global Return Premiums on Earnings Quality,| Alpha Architect
