We constantly learn more about investing, build disciplined strategies to capture the best of what we've learned, and share our broad findings with other curious investors.
In this quarter's letter, we're going to share our thoughts on three key topics: the Value factor’s extended run of poor performance, the ways we believe asset managers can borrow concepts from the technology sector, and our current research agenda.
The excess returns associated with Value and Momentum result from convergent and divergent processes, respectively. Value stocks are systematically underpriced and gradually converge on their fair value over time. Momentum stocks start out fairly valued or slightly overvalued, and go on to become more overvalued in the short-term, before reverting back. Both styles represent a market mistake that can be captured as alpha. In this piece, we're going to make all of these points more clear through a unified framework that we've developed to explain how factors work.
Today we are announcing a new initiative: the OSAM Research Partners Program. Through the program, we will begin building formal relationships with the brightest and most curious people we can find to produce new research for the benefit of our investors and the broader community.