2019-08-22 11:35:00 Thu ET
stock market gold oil stock return s&p 500 asset market stabilization asset price fluctuations stocks bonds currencies commodities funds term spreads credit spreads fair value spreads asset investments
Fundamental factors often reflect macroeconomic innovations and so help inform better stock investment decisions. Nobel Laureate Eugene Fama and his long-time co-author Ken French empirically find that several fundamental factors help price the cross-section of average asset returns. These fundamental factors include the return spreads between the top-and-bottom stock portfolios that the analyst sorts on size, value, momentum, asset growth, profitability, and market risk exposure.
In terms of stock market capitalization, small stocks often outperform large stocks by a significant 5%-7% factor premium. Value stocks can consistently beat glamour stocks by a 7%-9% factor premium. Furthermore, investors can earn hefty average returns on stocks with high recent share price performance, low capital-intensive asset growth, high cash profitability, and low market risk exposure (beta arbitrage). AQR Capital investment practitioners show that both value and momentum factor premiums significantly persist in global asset markets. To the extent that key factor premiums exhibit mutual causation with macroeconomic surprises, this causation serves as a new condition for fundamental factor selection. As investors learn from their behavioral biases, quirks, and other investment mistakes, these investors tilt their asset portfolios toward high factor premiums. This factor investment approach helps generate consistent supernormal asset returns in the long run.
If any of our AYA Analytica financial health memos (FHM), blog posts, ebooks, newsletters, and notifications etc, or any other form of online content curation, involves potential copyright concerns, please feel free to contact us at service@ayafintech.network so that we can remove relevant content in response to any such request within a reasonable time frame.
2017-01-03 03:26:00 Tuesday ET
President-Elect Donald Trump wants Apple and its tech peers to consider better and greater high-tech job creation in America. Apple has asked its primary
2018-10-09 08:40:00 Tuesday ET
The International Monetary Fund (IMF) appoints Harvard professor Gita Gopinath as its chief economist. Gopinath follows her PhD advisor and trailblazer Kenn
2020-01-15 08:31:00 Wednesday ET
Anti-competitive corporate practices may stifle U.S. innovation. In recent decades, wage growth, economic output, and productivity tend to stagnate as U.S.
2022-04-15 10:32:00 Friday ET
Corporate investment management This review of corporate investment literature focuses on some recent empirical studies of M&A, capital investm
2018-11-23 09:39:00 Friday ET
Former White House chief economic advisor Gary Cohn points out that there is no instant cure for the Sino-U.S. trade dilemma. After the U.S. midterm electio
2018-06-03 07:35:00 Sunday ET
Several recent events explain why Trump may undermine multilateral world order. First, Trump withdraws the U.S. from the 12-nation Trans-Pacific Partnership