OSAM on the Efficient Market Myth

While many believe that equity markets — particularly large-cap equity markets — are efficient, quantitative investing guru James O’Shaughnessy’s firm says the data shows otherwise. “Our research shows that, with the right strategy and the right discipline, the U.S. large cap market remains very inefficient and — by selecting stocks using historically proven themes — investors can outperform it by significant margins,” writes Patrick O’Shaughnessy in a new research report from O’Shaughnessy Asset Management. In the report, entitled “The Myth of the Most Efficient Market”, O’Shaughnessy discusses how more and more investors are turning to index funds for the large-cap […]

OSAM: How To Win In Emerging Markets

Emerging markets can make for enticing investments, and new research from James O’Shaughnessy’s firm shows how fundamental-focused investors can really take advantage of EM opportunities. “U.S. investors, and other investors around the world, tend to overweight their home country in their equity portfolio,” write O’Shaughnessy Asset Management’s Patrick O’Shaughnessy and Ashvin Viswanathan in a report available on the firm’s website. “By doing so, they miss out on considerable investment opportunities abroad.” They say that emerging markets are compelling for three key reasons right now: home bias, which has meant that many U.S. investors “have little to no direct allocation to […]

Active or Passive? Try (Parts of) Both

Should you choose actively managed funds for your investments, or passively managed funds? It’s one of the investing world’s great debates. And in a new research paper, James O’Shaughnessy’s firm says the answer is, perhaps you should use a little of both. Passive funds, Patrick O’Shaughnessy writes in the report, have three key advantages over active funds: lower fees, reliable strategy, and in some cases better tax management. But, he adds, they have a huge weakness that trumps those advantages: “the inferior strategy used by most indices to select and weight stocks.” Most passive funds weight stocks based on market […]

O’Shaughnessy: History Tells Us Now Is The Time to Buy

Jim O’Shaughnessy, Chairman and CEO of O’Shaughnessy Asset Management, believes that equity valuations “present buying opportunities akin to 1974 and 1982.” He writes that investors need to ignore short-term volatility and market-bottom calling, and instead focus on where stocks will be three to five years from now. O’Shaughnessy offers a number of historical stats that put the recent decline, volatility and opportunity in context. One is that “there have only been 66 days that the Dow closed +/- 6% (total return) from the previous close. Eight of those days (12%) have come since September 29th of this year.” Second, according […]

O’Shaughnessy: Leverage Responsible for Downturn but Stocks are “Compelling”

In a recent Reuters article, James O’Shaughnessy, chief investment officer of O’Shaughnessy Asset Management, says that lofty amounts of leverage was one of the major reasons for the current bear market and recession. But, O’Shaughnessy said that “stocks are now at their most compelling valuations since 1982. And Wall Street can come back too, with a modicum of temperance.” In September of this year, O’Shaughnessy wrote an excellent piece on this web site. The report, titled “The Only Thing We Have to Fear Is Fear Itself”, makes the argument that large stocks are due for some strong gains over the […]