Practical analysis for investment professionals

Dumb Alpha


Dumb Alpha: Dr. Quantlove or: How I Learned to Stop Worrying and Love the Stop Loss

Stop losses may not enhance returns, says Joachim Klement, CFA, but they enhance client well-being, and in the end, they may keep a client from selling what is otherwise a great long-term investment.

Dumb Alpha: Tactical Errors

If investors want to engage in tactical asset allocation, what would be the Dumb Alpha method of doing so? Joachim Klement, CFA, provides his advice.

Dumb Alpha: Do the Right Thing

One of the symptoms of middle age is that you start to give advice to younger people on what your experience has taught you about life. So Joachim Klement, CFA, puts his imaginary pipe into his mouth, adjusts his glasses, and explains why keeping it simple might be the most important "dumb alpha" lesson he has learned in his investing career.

Dumb Alpha: Don’t Just Do Something, Sit There!

Instead of being motivated by the rule “Don’t just sit there, do something,” investors might instead act based on the rule “Don’t just do something, sit there,” says Joachim Klement, CFA, in the latest edition of his Dumb Alpha series.

Dumb Alpha: Getting Rich Slowly

Instead of creating complex multilinear factor regressions, investors can outperform the market simply by selecting the stocks with the smoothest return profile — good, old, boring stocks that show no drama and a lot of stability, writes Joachim Klement, CFA.

Weekend Reads: No Alternatives and Things That Really Matter

The search for alternatives, things that really matter in the world, and a brief foray into the active vs. passive management debate are the topics included in this week's edition of Weekend Reads.

Dumb Alpha: Trailing or Forward Earnings?

In the spirit of dumb alpha, we can say that simple trailing P/E ratios are far better value indicators than forward P/E ratios. Or as I tell my colleagues at work: Never ever use forward P/E ratios. Ever.

Dumb Alpha: How to Build an Above Average Hedge Fund

Joachim Klement, CFA, demonstrates a method for beating average hedge fund returns — without the fees. It's the best dumb alpha can offer: a simple, low-cost investment strategy that outperforms more sophisticated and expensive alternatives.

Dumb Alpha: Don’t Get Carry Traded Away

Carry trades profit from investor herding just like momentum strategies. As more and more investors pour money into high-interest currencies and borrow on low-interest currencies, the demand for the former rises. This herding behavior can continue for quite some time, but it comes to a halt when investors are no longer willing to invest in high-interest currencies.

Dumb Alpha: Accelerating Momentum

Momentum investing can seem like an insult to your intelligence. Why should prices go up just because they have gone up in the past? But there is plenty of evidence that momentum investing works in the medium term.