Research

O'Shaughnessy Asset Management conducts ongoing research on the stock market, the concepts of long-term, disciplined investing and our investment strategies. We routinely look for ways to help communicate and improve our existing approach. We are also researching successful, empirically tested stock selection ideas for new strategies, and will publish these periodically.


May 2014

Alpha Capture and Liquidity — A Look at the Canadian Market

Equity investing in the Canadian market poses unique liquidity and alpha capture challenges. Systematic stock selection based on multi-factor composites for value and momentum strikes a balance between absolute return, risk-adjusted return, and persistence of alpha in the most liquid part of the market. OSAM’s Dynamic Rebalance® methodology balances alpha generation with market impact costs. This paper articulates the themes of value and momentum in stock selection and demonstrates their potential to result in significant long-term outperformance of Canadian benchmarks.

March 2014

Value & Momentum — Building a Unique Canadian Equity Portfolio

Canadian equity indexes based on market-cap-weighted constructions are structurally flawed and result in unforeseen concentration risks. Systematically buying stocks based on their valuations and market momentum has proven to be an effective way of beating market-cap-weighted indexes in markets around the world. These two themes work especially well in the Canadian equity market. This paper outlines why these two themes work so well in Canada, and how to use them to build a market-beating strategy.

August 2013

The Case for Global Dividends: Valuations and the Impact of Rising Rates

As interest rates have risen over the previous 12 months, we often get asked about the impact on the performance of dividend-paying stocks. The paper reviews the historical performance of dividend yield in the U.S. back to 1926 and globally back to 1970. We conclude with suggestions on areas of the market we believe represent compelling opportunities.

January 2013

Expanding Horizons:

The Most Difficult Environment for Generating Income in 140 Years

In the most difficult environment for generating income in 140 years, we survey the landscape of income-generating options, review lessons from the previous bond Bear Market, and demonstrate why we believe global, dividend-paying equities deserve a prominent role in investor portfolios.

December 2012

Video: Equities and the Fiscal Cliffhanger

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Does a “fiscal cliff” pose a threat to equities? Find out in this 5-minute visual recap of the popular OSAM white paper “The Fiscal Cliff and Your Portfolio”.

October 5, 2012

The Fiscal Cliff and Your Portfolio

Investors are understandably concerned with a "fiscal cliff" and what the resultant tax increases may mean for their portfolio values and dividend income. Our analysis suggests that, across history, tax rates and changes to those rates generally have not meaningfully impacted equity returns. Surprisingly, dividend-paying stocks performed best when taxes were highest.

October 2012

All Cap Core—A Strategy Based on Diversification & Consistency

This paper discusses how the O’Shaughnessy All Cap Core strategy combines the themes revealed in What Works on Wall Street, with eight decades of empirical evidence, to design a diversified core U.S. equity strategy that puts the historical odds in the investor’s favor. We conclude with a study of our strategy model from 1964-2011 to draw inference on how the strategy could perform in various scenarios including recessions and volatile market environments.

September 2012

Dividend Yield vs. Dividend Growth

Investor appetite for high-yielding companies continues to grow. However, there are those who believe high dividend payments are a poor indicator of a company’s future growth prospects and prefer to select stocks using “dividend growth” instead. Our research suggests that investors should focus on dividend yield rather than dividend growth rates.

January 2012

Stocks, Bonds, and the Efficacy of Global Dividends

In this paper OSAM reviews the prospects for the major asset classes comprising investor portfolios: stocks and bonds. We then look at one of the most tried-and-true investment strategies of all time: dividends. But with a caveat — global dividends. We conclude with a study from 1977 to 2010 demonstrating why income investors should include equity dividends in their portfolio.

November 2009

All Cap Core Insights

Learn how anomalous trends have contributed to the recent underperformance of the All Cap Core strategy and why we do not expect these trends to continue.

September 10, 2009

Buying the Bounce

Despite the recent trend of low-momentum stocks outperforming high-momentum stocks, buying recent winners has proven itself over more than 80 years to be one the most effective stock selection strategies. Momentum-based strategies currently offer a phenomenal "buy low" opportunity.

September 9, 2009

High-Yield Investing in Today’s Market

See why history tells us that investing in stocks with high dividend yields is a great way to beat the market following recessions.

April 2008

Investor Sentiment Analysis

“Be fearful when others are greedy and greedy when others are fearful.”
— Warren Buffett

A study of the American Association of Individual Investors' (AAII) "Investor Sentiment" poll from 1987-2008 (survey is available to AAII members at their website), provides solid evidence for Buffett's principle, especially as it pertains to growth investing. The average rolling one- and three- year returns to indices or strategies bought during times of prevalent bearish sentiment were all superior to their long term one- and three- year averages. The outperformance was most significant for growth strategies. For example, if you bought the Russell 2000 Growth during these periods of investor malaise, the average one year return would have been 7.36% better than the overall average one-year return between 1987 and 2008. The opposite holds true during very optimistic times. All strategies (with the exception of Market Leaders Value) underperformed their long term average following periods when investors were the most hopeful. The data leads to a simple conclusion: when people are overly excited about the market, buy value. When they panic, buy growth. Market Leaders Value is a strong strategy regardless of investor sentiment—it is the one exception to the rule. Click here to download the rest of the study.

 


Investors should keep in mind that there is no certainty that any investment or strategy will be profitable or successful in achieving investment objectives. Past performance is not an indication of future results.