Insights

Challenging the Traditional Style Box with Momentum

Since 1992, the Style Box framework has been used for portfolio diversification and to improve investment outcomes. This paper challenges that popular construct, highlighting momentum as a worthy stand-alone alpha source, or a substitute to traditional growth.

Momentum Crashes Update: 2022/2023

This is a follow-on to our earlier paper Momentum Crashes: The Long & the Short of It. In this short piece, we highlight the historical significance of two recent momentum crashes that occurred in November 2022 and January 2023. We also note that coming out of periods like this, historically long-only momentum has done quite well.

Risky Business: Momentum & Value

There is a common notion that a momentum strategy carries higher risk than that of a value strategy. This analysis puts that idea to the test using nearly 100 years of data and various risk measures. In this paper, we discuss the potential reasons for this misconception and show evidence that momentum has lower realized risk than value over time, while outperforming meaningfully.

The Quick and the Dead

This analysis shows the impact to a momentum-based investment strategy from different rebalancing frequencies. Our research suggests that turning the portfolio often is necessary to harvest the momentum premium consistently through time – thus placing turnover and implementation costs as key considerations in any successful momentum strategy.

Momentum Crashes: The Long & the Short of It

A consistent pushback against momentum is the strategy’s susceptibility to short, sharp periods of underperformance. In this paper, we analyze some of the worst momentum crashes in history to discover how these periods of underperformance can be nearly fully mitigated.

Momentum: The Ever Rising Tide

Our research and that of others finds the momentum premium to be robust, persistent through time and pervasive across asset classes. In this paper, we discuss reasons for the momentum premium, as well as how to use a momentum strategy as part of a diversified portfolio.

Momentum Is Not Growth

Momentum and growth do have positive excess return correlations over time; however, in this paper we describe the ways in which the two styles are inherently different, leading to very different outcomes over time.

Momentum Is Usually Not Value

Momentum and value tend to be opposites; one outperforming, while the other underperforms. This negative correlation provides strong diversification benefits to investors, along with long-term alpha. While they are much different strategies with different return patterns over the long term, that doesn’t mean that they don’t converge at times.

Global Equity Market Analysis

May 2023

This monthly analysis offers timely insight into current global equity market dynamics. The report provides high-level performance observations by size category and style, as well as depth on the drivers of performance within the MSCI ACWI Index and MSCI ACWI Small Cap Index.

US Equity Market Analysis

May 2023

This monthly analysis offers timely insight into current US equity market dynamics. The report provides high-level performance observations by size category and style, as well as depth on the drivers of performance with regard to various characteristics and factors.

Non-US Small Cap Equity Market Analysis

May 2023

This monthly analysis offers timely insight into current Non-US Small Cap equity market dynamics. The report provides high-level performance observations by size category, market and style, as well as depth on the drivers of performance within the small cap equity market.

The Case for Global Small Cap Equities

November 2022

In this analysis, we explore the benefits of a dedicated allocation to global small cap equities. We discuss what factors have contributed to active managers' consistent success over time, and conclude with what style exposures have historically worked best in the global small cap universe.

China, Concentration & Cap Bias in Emerging Markets

November 2022

The recent volatility in Chinese equity markets has highlighted immanent risks for many emerging markets portfolios. In this paper, we demonstrate how asset allocators can offset unintended risks and improve outcomes with a dedicated allocation to emerging markets small cap.

Non-US Small Cap – If Not Now, When?

September 2022

While expectations for public equities have been slashed everywhere in 2022, expectations for equities outside the US have gone from bad to worse. Low prices and depressed valuations point to opportunity for non-US stocks, as not much is needed to go right for them to surprise to the upside and outperform. While we don’t know when the tide will turn, history shows that when markets make a comeback, small cap should lead the way.

The Opportunity in Micro Cap

May 2022

Our research suggests that a dedicated allocation to US micro cap provides a compelling, complementary exposure for allocators that either have a large cap bias or are looking for additional alpha opportunity. In this paper, we show micro cap stocks have offered higher long-term returns among US equities, diversification benefits, and a fertile ground for active managers to consistently outperform.

Small Cap and Micro Cap Market Dynamics Research

January 2021

This analysis of the US equity universe highlights the investment opportunity in small/micro cap stocks, looking at market dynamics and long-term returns by market capitalization.

International Small Cap White Paper

January 2019

In this white paper, we seek to demonstrate why we believe there is a tremendous missed opportunity for alpha generation given the characteristics of non-US small cap equity universe. Additionally, we seek to highlight key active management attributes that have historically been successful in navigating these markets.