During this time, his interest in quantitative research was recognized by a colleague who was on the board of directors with O'Shaughnessy at the St. Paul Chamber Orchestra. While very different from the ensembles of decision trees that we saw last time, these new models also generalize linear regression and should be easy to incorporate into your modeling process. Anyone overweight to non-U.S. allocations has suffered over the previous ten years. In a recent article he included the following Q & A with Patrick. This represents a change in shares of -100.00 percent and a change in value of -100.00 percent during the quarter. Today we are announcing a new initiative: the OSAM Research Partners Program. It is hard to find, highly sought after, and requires skill to extract. Had the hypothetical backtested performance results included a positive cash position, the results would have been different and generally would have been lower. 1 If interested, read the detailed section on buybacks in Appendix E, which lays out the caveats to this argument. 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. For the full composite performance summaries, please follow this link: The Earnings Mirage: Why Corporate Profits are Overstated and What It Means for Investors. The integrated equity methodology can be used to build a valuation measure for the overall stock market. The hypothetical backtested performance does not represent the results of actual trading using client assets nor decision-making during the period and does not and is not intended to indicate the past performance or future performance of any account or investment strategy managed by OSAM. Our new research indicates that the problems with book value cause earnings to be overstated. Among the litmus tests for those themes is persistence. ▪ OSAM may from time to time manage an account by using non-quantitative, subjective investment management methodologies in conjunction with the application of factors. This commentary by the OSAM Research Team may persuade clients to stay calm and, if possible, add to the equity market. It causes depreciation to be understated in current price terms, which causes earnings to be overstated. Here are a few highlights of our findings from the piece: Book-value-based measures such as price-to-book and return on equity compare terms that have been expressed in different price units, leading to lopsided, distorted results. 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. Jim O’Shaughnessy looks at historical returns for stocks and bonds in various inflationary environments, and what investors might expect going forward. O'Shaughnessy has authored several books that use Standard & Poor's Compustat database to provide extensive quantitative analysis of stock market performance. Read this paper to learn more about the opportunity for consistent, long-term excess returns that awaits investors in the overlooked, undervalued and unappreciated, and uniquely-positioned microcap space.

Private equity has … To shed light on this challenging period we explore the profile of the stocks which have led the Russell 1000® benchmarks. His fascination with the stock market began at an early age when he started to manually track characteristics common to the 30 companies in the Dow Jones Industrial Average stock index. But this paper focuses instead on the second potential advantage: active stock elimination, or identifying stocks not to own in the portfolio. Moreover, you should not assume that any discussion or information contained in this piece serves as the receipt of, or as a substitute for, personalized investment advice from O’Shaughnessy Asset Management, LLC.

Many investors readily agree that alpha is scarce.

We pursue a simple mission: learn, build, share, repeat. Historically, high buyback firms have had high returns on equity, further bolstering our confidence in the factor. During such challenging times, CEO Patrick O’Shaughnessy shares some insights on recent factor performance and what the long-term evidence suggests for markets going forward. Granted, this is a single cohort of stocks and isn’t meant to be convincing evidence in favor of high buyback stocks on its own, but in this cohort, the trend is smooth and steady. [6], In 1997, the Royal Bank of Canada (RBC) launched the RBC O'Shaughnessy mutual funds for Canadian investors. Huber was an early Canvas partner and understands the power of customized portfolio management. Our research suggests that a historic opportunity may be forming in small cap companies, particularly small cap value. This paper outlines a very brief history of buybacks, explores the reasons (good and bad) that companies buy back stock, and explains the huge advantage available to investors who incorporate buybacks into a total “shareholder yield” calculation to be used in their investment strategy, while at the same time avoiding companies that are buying back shares for the wrong reasons. The price-to-book ratio has a problem. While private equity offers potential advantages, it also requires taking distinct risks. In the face of so much grim economic news and uncertainty about the future, the OSAM Research Team reviews the historical implications of low economic growth, high unemployment, low consumer confidence and top marginal tax rates on future stock returns. Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions. This commentary, redefining inefficiency as opportunity, identifies the significant potentials for excess return in small cap equities and serves as a guide to navigate this often-overlooked area of the market. ▪ Accounts managed by OSAM are subject to additions and redemptions of assets under management, which may positively or negatively affect performance depending generally upon the timing of such events in relation to the market’s direction. They can be good for shareholders or bad for shareholders, depending on the price the company pays. Finance, March 13, 2017. You are leaving the O'Shaughnessy Asset Management website and entering the O'Shaughnessy Mutual Funds website.

The eclectic microcap universe provides a disparate group of continually evolving and devolving businesses with structural features that remain persistently attractive for investors. This is a summary of findings from a recent long-form research piece by Jesse Livermore+, "The Earnings Mirage". You are leaving the O'Shaughnessy Asset Management website and entering the O'Shaughnessy CANVAS website. O'Shaughnessy Asset Management is a quantitative money management firm. Has an increase in shareholder transactions (primarily share repurchases) contributed to how price-to-book has gradually become ineffectual in recent years? Is there an undiscovered market where valuations are not systematically picked apart by Wall Street analysts, where huge changes in valuation often go unnoticed, and a stock’s price is very much at odds with its true value? He is also a member of the Board of Trustees for Common Good. operates as an investment management company. As factors, return on equity and return on invested capital deliver higher returns when free cash flow is substituted in the place of earnings: The evidence still suggests that a “composite” approach which blends many similar metrics together is the best way to implement a theme like value or profitability. Both styles represent a market mistake that can be captured as alpha. In the piece, we show that this conclusion holds true across different equity samples. We tested the P/IE ratio, which is also a non-cyclical measure, against the CAPE and other popular metrics and found that it outperforms all of them, across a diverse collection of time periods: Using the P/IE ratio, we can set long term strategic expectation for future U.S. equity returns: As of June, 2019, the estimate comes out to roughly 3-4% annualized—significantly lower than trailing 10-year returns and also lower than the long term historical average. As its use becomes widespread, machine learning (ML) has the potential to change almost every part of society, both by automating routine activities and by improving performance in difficult activities. Please defer to formal tax documents received from the account custodian for cost basis and tax reporting purposes. You are leaving the O'Shaughnessy Asset Management website and entering the O'Shaughnessy CANVAS website. Chris Meredith, OSAM's Director of Research & Portfolio Management, and Portfolio Manager Patrick O'Shaughnessy highlight an alternative to private equity: microcap equities. Please Also Note: Please compare this statement with account statements received from the account custodian. The excess returns associated with Value and Momentum result from convergent and divergent processes, respectively.

As a result, depreciation becomes understated, which causes earnings to be overstated. [10], In 2001, O’Shaughnessy and his team from O’Shaughnessy Capital Management moved to Bear Stearns Asset Management (BSAM), where O’Shaughnessy served as a Senior Managing Director and the executive director of Systematic Equity.

Shareholder yield is the sum of a company’s dividend yield plus its buyback yield (the percentage of shares outstanding that have been repurchased or issued over the last year). The first advantage is the one that most people think of: active stock selection. In 1988, O'Shaughnessy started O'Shaughnessy Capital Management, Inc. and began consulting to large pension funds and foundations.[5]. References to the 'momentum factor' appear as early as 1913, but the drivers of this factor stretch back even further. After studying international economics and business diplomacy at the School of Foreign Service of Georgetown University, O'Shaughnessy graduated with a Bachelor of Arts in economics from the University of Minnesota in 1986. The excess return (blue line) is steady through time, and tracks the difference in buyback amount (red line) between high and low buyback firms. Appendix A: An Intuitive Example that Clarifies Important Claims Made in the Piece, Appendix B: Calculating the Return on Differential Equity, Appendix E: Integrated Equity Data for Sectors, Industries, Countries and Factors, Appendix F: The Overstated Earnings Hypothesis in Accounting Simulation, Appendix G: Initial Equity in the PIE Ratio Calculation. ▪ The hypothetical backtested performance results for each factor do not reflect any transaction costs of buying and selling securities, investment management fees (including without limitation management fees and performance fees), custody and other costs, or taxes – all of which would be incurred by an investor in any account managed by OSAM.