Author: Yuval Taylor

What We Talk About When We Talk About Volatility. When we as investors talk about volatility, we’re usually talking about variability in price returns. If an investment goes up and down 5% to 10% per day, that’s high volatility; if it goes up and down 0.05% to 0.1% per day,…

This article is the last in a ten-part series loosely based on Michael J. Mauboussin’s white paper “Thirty Years: Reflections on the Ten Attributes of Great Investors.” See “Part One: Be Numerate,” “Part Two: Understand Value,” “Part Three: Properly Assess Strategy,” “Part Four: Compare Effectively,” “Part Five: Think Probabilistically,” “Part…

In high-volatility markets like the one we’re in now, low-volatility investing can offer considerable comfort. But it can also offer excess returns. In this article, I’m going to single out six basic factors (and their variations) that investors should explore when designing a low-volatility model, and I’m going to present…

Building and Breaking Models If you’re a quantitative investor or trader, you build a model and then backtest it to see if it has worked in the past; if you’re like most people, you try to improve your model with repeated backtests. You’re operating under the assumption that there will…

This article is the ninth in a ten-part series loosely based on Michael J. Mauboussin’s white paper “Thirty Years: Reflections on the Ten Attributes of Great Investors.” See “Part One: Be Numerate,” “Part Two: Understand Value,” “Part Three: Properly Assess Strategy,” “Part Four: Compare Effectively,” “Part Five: Think Probabilistically,” “Part…

The Evidence: Momentum Works As a factor, momentum—the idea that a stock’s relative returns over the past six to twelve months have a tendency to persist over the next six to twelve months—has proved remarkably resilient. Academics first recognized this factor in the early 1990s, and its return premium has…

This article is the eighth in a ten-part series loosely based on Michael J. Mauboussin’s white paper “Thirty Years: Reflections on the Ten Attributes of Great Investors.” See “Part One: Be Numerate,” “Part Two: Understand Value,” “Part Three: Properly Assess Strategy,” “Part Four: Compare Effectively,” “Part Five: Think Probabilistically,” “Part…

The conventional method of finding out whether or not a factor works is to look at the performance of the top (or bottom) ten or twenty percent of stocks ranked according to that factor and then subtract the bottom (or top) ten or twenty percent. One should then buy stocks…

This article is the seventh in a ten-part series loosely based on Michael J. Mauboussin’s white paper “Thirty Years: Reflections on the Ten Attributes of Great Investors.” See “Part One: Be Numerate,” “Part Two: Understand Value,” “Part Three: Properly Assess Strategy,” “Part Four: Compare Effectively,” “Part Five: Think Probabilistically,” and…

What Is Alpha? Alpha has, over the last fifty years, become the standard way to measure the active return of a portfolio: how much the portfolio outperformed the benchmark. Technically, however, it’s a point on a line, specifically the point where the line crosses the y axis. And that line…