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Generating Alpha in Equity Portfolios

Adding value through stock selection

Fund managers around the world use a multitude of different processes and philosophies to try to gain an edge. We've selected a bunch of the best papers that themselves seek to add value in the search for alpha. They cover a range of different approaches - bottom-up, top-down, quant, technically-driven, factor-based.

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Windmill generating alpha equity portfolios papers

When paying a high multiple makes sense (Robeco, 2017)
This paper by Robeco asks when are high valuations are justified, if ever. The authors state that although markets may occasionally base valuations on inaccurate expectations, these expectations are seldom biased.

The Case for Multi-Beta Multi-Strategy High Factor Exposure Indices (EDHEC, 2017)
This paper introduces Scientific Beta's well-diversified "top-down" multi factor approaches and compares them with "bottom-up" score-weighting approaches that target high factor intensity.

Technical Analysis: Modern Perspectives (CFA Institute Research Foundation/Market Technicians Association)
This paper, a collaboration between CFA Institute Research Foundation and the Market Technicians Association, explores in detail the different facets of technical analysis.

Seeking Income: Cash Flow Distribution Analysis of S&P500® Buy-Write Strategies (S&P Dow Jones Indices)
This study investigates popular buy-write benchmarks, as well as other alternative strategies with varied strike selection, option maturity, and underlying equity instruments. The authors make a number of important observations.

Fundamentals of Efficient Factor Investing (FAJ, 2017)
This paper appeared in the CFA Institute's Financial Analysts Journal. It examines factor-based investing and simulates optimal combinations of factor and security portfolios.

Are Cash Flows Better Stock Return Predictors Than Profits? (Financial Analysts Journal, 2016)
This paper examines whether cash flows, instead of profits, are a better predictor of stock returns. The income statement has long been at the center of financial statement analysis, but its shortcomings call its efficacy into question.

Do you know where your equity revenues are coming from? (Wellington Management, 2017)
Nanette Abuhoff Jacobson, Global Investment & Multi-Asset Strategist, delves into sources of revenues for US, European, Japanese, and emerging markets equity markets, and explores how their relative exposures shape her own investment views.

Start of Something Big: Demystifying the Source of Large Alpha in Small Caps (QMA)
In a world where alpha can seem scarce, active small-cap managers continue to outperform their benchmarks in an impressive way. But why? This paper by QMA explores further.

Two Centuries of Price-Return Momentum (Financial Analysts Journal, 2016)
This 25-page paper, co-authored by Mikhail Samonov and Christopher C. Geczy, provides a dataset of monthly United States security prices between 1801-1926. It was published in CFA Institute's Financial Analysts Journal.

Hallmarks of Successful Active Equity Managers
How can investors select active equity managers to maximize their odds for success? This paper discusses key characteristics to look for.