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Late last week I had a call with an advisor who asked about any new research we had published relating to one of our mandates.

I realized that in the last 6 months we had done a significant amount of research but had published none of it.  It all was laid to rest in our research graveyard.

Externally, it appeared as if there was no action.  Internally, there was quite a bit of action: it just all led to more dead ends.

Dead ends can be fruitful, however, as investing can be just as much about avoiding what doesn't appear to work as it is about doing what does.

This week's commentary is in the same vein.  We extend last week's cross-sectional analysis to a time-series analysis.  In doing so, we ask whether the same quantitative signals – momentum, carry, value, and reversals – can provide information about whether we want long or short exposure to an asset.

Unlike last week, we find little statistical significance in this week's analysis (PDF).

Which might be useful information after all.


🎧 LISTEN: I join Neils Kaastrup-Larsen, Mortiz Seibert, and Jerry Parker on the The Systematic Investor Podcast to talk all things risk.  We discuss the framework of what/how/when diversification, the importance of understanding sequence risk, and talk about our philosophies of "no pain, no premium" and "risk can never be destroyed, only transformed."

Read of the Week
→ TREND: "Specifically, risk premiums are significantly larger (lower) following recent uptrends (downtrends) in the underlying risk factor. A trend-based dynamic factor strategy, which uses the trend-based signals in order to lever up or down the risk factor, yields annual utility gains of up to 500 basis points, doubles the risk factors' Sharpe ratio, and more than halves their maximum drawdown."  What Goes up Must Not Come Down - Time Series Momentum in Factor Risk Premiums

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