Popularity, Risk, and Return

Risk and Return Within the Stock Market: What Works Best?
By Roger G. Ibbotson, Ph.D. and Daniel Y.-J. Kim, Ph.D.
The latest version of "Risk and Return Within the Stock Market: What Works Best?" that studies the long-term risk vs. return characteristics of 21 return-predictive metrics as applied to the U.S. equity market from 1971 to 2016. Contrary to the conventional wisdom on risk and reward, most portfolio sorting metrics exhibit an inverse risk-return relationship, with lower risk portfolios outperforming higher risk portfolios. A broad theme that emerges from the empirical evidence is that popularity underperforms.

Dimensions of Popularity
Journal of Portfolio Management, vol. 40, no. 5 (Special 40th Anniversary Issue, 2014), p. 68-74.
By Roger G. Ibbotson, Ph.D. and Thomas M. Idzorek
A broad exposition of the central role of popularity in asset pricing, arguing for the consideration of popularity outside of a standard risk framework, and differentiating low-popularity equity strategies from low-volatility and low-beta strategies.

Liquidity as an Investment Style

Liquidity as an Investment Style
Updated 2018

By Roger G. Ibbotson, Ph.D. and Daniel Y.-J. Kim, Ph.D. 
The latest version of "Liquidity as an Investment Style," including updates of all empirical results to reflect additional U.S. market data.

CFA Institute Names Top Financial Analysts Journal Articles with Annual Graham and Dodd Awards
Press Release, CFA Institute, Feb. 2014.
Names "Liquidity as an Investment Style" as the Top Award winner of 2013. Includes a clickable link to download the published paper, free of charge, from the Financial Analysts Journal website.

Liquidity as an Investment Style
Financial Analysts Journal, vol. 69, no. 3 (May/June 2013), p. 30-44.
By Roger G. Ibbotson, Ph.D., Zhiwu Chen, Ph.D., Daniel Y.-J. Kim, Ph.D., and Wendy Hu, Ph.D. 
Using long-term empirical data from U.S. equity markets, this paper presents comprehensive evidence that liquidity, as measured by share turnover, is indeed an investment style as defined by Sharpe (1978) and should be included as a control in cross-sectional studies of stock returns.
This research paper represents the Firm’s founders’ first research into liquidity in the public equity markets and serves as the underpinnings for the development of Liquidity Strategies.

Additional Liquidity Research

The Liquidity Style of Mutual Funds
By Thomas Idzorek, James Xiong, Ph.D., and Roger Ibbotson, Ph.D.
Expands upon Ibbotson, Chen, Kim, and Hu's initial findings and examines whether liquidity premium can be uncovered not just at the stock level, but at the mutual fund level. Finds that mutual funds that hold less liquid stocks significantly outperform mutual funds that hold more liquid stocks, even though mutual fund managers do not directly focus on liquidity. 

Liquidity Styles and Strategies in U.S., International, and Global Markets
By Roger G. Ibbotson, Ph.D., Wendy Y. Hu, Ph.D.
Expands upon the study of the U.S. stocks of the “Liquidity as an Investment Style” paper to include global and international markets. Finds that liquidity strategies work all around the world and provide downside protection in all the markets.

Historical Investment Fund Performance

The ABC’s of Hedge Funds: Alphas Betas, and Costs By Roger G. Ibbotson, Ph.D. and Peng Chen, Ph.D., CFA
Analyzes the potential biases in reported hedge fund returns and then decomposes historically reported hedge fund performance in their three A,B,C components: alphas, betas and costs.

Offshore Hedge Funds: Survival & Performance 1989 – 1995
By Stephen J. Brown, William N. Goetzmann, and Roger G. Ibbotson
Examines the performance of the off-shore hedge fund industry from 1989-1995.

Do Winners Repeat with Style?
By Roger G. Ibbotson and Amita K. Patel
Examines the persistence of mutual fund performance, after adjusting for the investment style of the fund

Examinations of Historical Equity Returns

History and the Equity Risk Premium
By William N. Goetzmann and Roger G. Ibbotson
Summarizes past findings by the researchers’ and places them in the context of the historical development of the equity risk premium and its measure by financial economists.  Also updates the researchers’ study of the historical performance of the NYSE since 1792.

Momentum, Acceleration & Reversal
By James X. Xiong and Roger G. Ibbotson
Examines the impact of accelerated stock price increases on future performance. Accelerated stock price increases are a strong contributor to both poor future performance and a higher probability of reversals. It implies that accelerated growth is not sustainable and can lead to drops. The acceleration mechanism is also able to reconcile the well-documented 2-12 month momentum phenomenon and one-month reversal.

Stock Market Returns in the Long Run: Participating in the Real Economy
By Roger G. Ibbotson, Ph.D. and Peng Chen, Ph.D., CFA
Estimates forward-looking long-term equity risk by extrapolating its participation in the real economy.  Decomposes historical equity returns from 1926-2000 into factors including inflation, earnings, dividends, P/E, dividend payout ratio, book value, ROE, and GDP per capita.

A New Historical Database for the NYSE 1815 to 1925: Performance and Predictability
By William N. Goetzmann, Roger G. Ibbotson, and Liang Peng
Estimates a historical stock price index that extends to the beginning of the NYSE

Asset Allocation

Human Capital, Asset Allocation, and Life Insurance
By Roger G. Ibbotson, Peng Chen, Moshe Milevsky, and Xingnong Zhu
Investigates the impact of human capital on asset allocation decisions.

ZCM Researchers

Roger Ibbotson at the Yale School of Management

Roger Ibbotson at Google Scholar

ZCM Research in the News

3/2016: Pensions & Investments
Alaska Retirement Board Hires Zebra Capital for 2 hedge funds

1/2016: Pensions & Investments
2 Take Home Markowitz Prize

6/2015: Seeking Alpha
The Price Of Liquidity

4/2015: Pensions & Investments
Alaska Retirement Management Board Corrals Zebra for Microcap Equities

4/2015: Investment Adviser
Industry View: The Art of being Unpopular

3/2015: Morningstar
How to Identify Stocks That Will Beat the Market

3/2015: Seeking Alpha
Go Ugly Early When It Comes To Benjamin Graham's Stocks Trading Below Net Current Asset Value

3/2015: Cash [DE]
Unlikely Stocks Are Exciting(tr)

3/2015: Finanzen.net [DE]
In the long term, illiquid stocks perform better(tr)

3/2015: TheStreet.com
Picking Brackets vs. Picking Stocks

3/2015: Money Magazine
Are Your Stocks Too Popular?

3/2015: Morningstar [IT]
Poor Popularity, High Yield(tr)

3/2015: Morningstar [FI]
It is not worth favoring a popular stock(tr)

3/2015: Fondsnieuws [NL]
Ibbotson: Popularity Explains Outperformance(tr)

2/2015: Funds Society [ES]
Roger Ibbotson at the 5th Annual Morningstar Investment Conference in Europe(tr)

2/2015: The Motley Fool
The Problem With Popular Stocks

2/2015: Funds Society [ES]
Zebra Capital, Amiral: the other managers that have landed in Spain so far this year(tr)

2/2015: TheStreet.com
Liquid Stocks Are a Waste of Money

2/2015: Manager Magazin [DE]
Investment Guru Advises Self-defense(tr)

2/2015: Funds People [ES]
Who and What Landed in Spain in January?(tr)

1/2015: The Economist
Drop of the pops

1/2015: Consumer Reports
To Make More Money, Avoid Popular Stocks

1/2015: Financial Planning
Real Danger of Hot Stocks

12/2014: The Motley Fool
Why Chasing Hot Stocks Could Burn You

11/2014: Pensions & Investments
Popularity: Way to Explain Performance

11/2014: ThinkAdvisor
Unpopular Stocks Beat Popular Ones: Study

10/2014: ETF.com
Swedroe: Beware Stars Of Investment Balls

10/2014: Funds Society [ES]
Zebra Capital launches two UCITS Small Caps Funds in its Luxembourg Sicav(tr)

10/2014: ETF.com
Swedroe: The Best Returning Styles

10/2014: ETF.com
Swedroe: Targeting Liquidity As A Style

8/2014: Le nouvel Economiste [FR]
Illiquidity, the fourth musketeer of stock market performance(tr)

7/2014: MoneyWeek
Want to beat the market? Buy stocks that you can’t trade easily

5/2014: The Globe and Mail
Want high returns? Don’t pay for liquidity you don’t need

5/2014: TheStreet.com
Has Ibbotson Found a Better Way to Beat the Market?

4/2014: Pensions & Investments
Ibbotson: Less Liquidity Doesn't Mean More Risk

4/2014: Pensions & Investments
Factor-based Approach Gains Momentum

2/2014: CFA Institute
CFA Institute Names Top Financial Analysts Journal Articles with Annual Graham and Dodd Awards

Research Presentations

5/2015: Nomura Global Quantitative Investment Strategies Conference, New York


Yale School of Management

Yale School of Management – International Center for Finance