Alpha Trading Strategies

101 Ways to Generate Alpha - the top white papers

Alpha Strategies for Equity Investors

Active equity managers use many different investment strategies and processes to meet the challenge of consistently creating alpha within their portfolios. Below we have highlighted some of the top papers, which help equity investors to build successful alpha-generating processes. 

windmill river generating alpha best white papers

FORMULAIC ALPHA - 101 Formulaic Alphas (Quantigic, 2015)
This Dec 2015 paper presents explicit formulas (including computer code) for 101 real life quant trading alphas. It examines the results of each algorithm.

VALUE - Company Valuation Methods (Pablo Fernandez, 2015)
For many investment managers, a key aspect of the investment process is to ensure that companies in their portfolio are reasonably valued. This popular paper by Pablo Fernandez examines the four key types of commonly used company valuation methods.

QUALITY - The Dimensions of Quality: High Profitability and Low Investment (2016)
Those who have examined Warren Buffet's successful pursuit of alpha over past decades tend to conclude that his out-sized returns have been generated from purchasing high quality, reasonably-valued stocks. Most fundamental stock-picking processes will take some account of the "quality" of the company and its earnings. This paper from EDHEC examines different approaches to quantifying the nebulous definition of "quality".

SIZE - Size Matters, If You Control Your Junk (Cliff Asness et al, 2015)
The "size" premium was discovered in the early 1980s. Since then, its effectiveness appears to have waned, and there are many practical objections to its use. This paper, however, argues that if you control for quality, a significant size premium emerges, which is robust and consistent.

LOW VOLATILITY INVESTING - Theory and Practice (Research Affiliates, 2015)
In recent years, a body of academic research has built up to suggest that investment in low beta stocks generates excess returns. This paper from Research Affiliates examines the theory and implementation of such an approach.

TREND-FOLLOWING - Fact, Fiction and Momentum Investing (AQR Capital, 2014)
Momentum strategies, in various guises, are one of the most common approaches to alpha generation, across multiple asset classes. This paper by Cliff Asness and others discusses commons myths surrounding momentum investing and examines the most effective processes for adding value in this way.

BIG DATA - Finding Big Alpha in Big Data (BlackRock, 2015)
Data scientists at BlackRock believe that in future, the only way to generate sustained alpha will be for investors to embrace the world of "Big Data". They argue that investors who fail to take this approach will be left behind.

BUYBACKS - Do Share Repurchase Announcements Lead to Higher Returns? (2014)
Over the years, a number of academic studies have suggested that share repurchase announcements tend to be followed by a period of excess shareholder returns. This paper by S&P Capital IQ uses original research to conclude that share buybacks do indeed have informational value in predicting future returns.

EARNINGS SURPRISES - "Consistent" Earnings Surprises (2014)
Companies with "earnings surprises" tend to see sustained outperformance, beyond the day of the earnings announcement. In this paper, the authors suggest that "earnings surprises" can be reliably predicted.

TRADE EXECUTION ALPHA - The hidden alpha in equity trading (Oliver Wyman)
The electrification of trading platforms has changed the trading landscape, creating opportunities for HFT traders with complex rule-based strategies to take advantage of the new market framework. For traditional traders, it is essential to understand the rules of this new game and adapt accordingly.

FACTOR INVESTING – Academic Lessons on Factor Investing (EDHEC, 2016)
This paper examines what academic research has to say on equity factors. The authors seek to provide investors with important lessons to learn, particularly in terms of designing and evaluating factor indices.

SMART BETA MULTIFACTOR INDEXES - The Power of Tilting (FTSE Russell, 2016)
This paper by FTSE Russell examines alternative processes for building multifactor indexes, in order to benefit from a diversified exposure to the various source of factor return.

PERSISTENCE - "Can a Strategy Still Work If Everyone Knows About It?" (Asness)
In this paper, Cliff Asness investigates the question of whether or not "discovered” strategies remain functional, arguing that some classic long-term strategies will remain successful in the future, albeit with a different risk profile than in the past.