Value

Quantitative strategy research is rarely about discovering a single “perfect” trading rule. In practice, robust portfolios emerge from a structured research process that filters ideas, evaluates evidence, and combines complementary strategies.

To make the process concrete, we use value-based equity strategies as our working example. However, the goal of the article is not to identify the ultimate value strategy, but to illustrate how a systematic research workflow can be used to build a diversified portfolio of strategies around any investment hypothesis.

The goal of our article is to examine the long-term relationship between small value and large growth stocks using more than 100 years of data and test whether the spread between small value and large growth portfolios shows trends that could help investors switch between the two styles. Using the Fama and French 2×3 and 5×5 size and book-to-market portfolios, we construct the small value minus large growth (SV–LG) spread and apply simple trend-following signals based on moving averages and momentum with horizons ranging from 3 to 12 months. Our results show that trend-following strategies are able to capture part of the value outperformance on the long side. Timing periods when growth stocks dominate is much more difficult.

One year is again behind us (in this case, it was 2025), and we are all a little older (and hopefully richer and/or wiser). Turn-of-the-year period is usually an excellent time for a short recap. Over the past 12 months, we have kept our pace and published nearly 70 short analyses of academic papers and our own research articles. So let’s summarize 10 of them, which were the most popular (based on the Google Analytics ranking). The top 10 is diverse, as usual; once again, we hope that you may find something you have not read yet …

Cryptocurrencies have matured from experimental curiosities into a viable investable asset class whose return-generation and risk characteristics merit treatment within empirical asset pricing. A recent paper by Nicola Borri, Yukun Liu, Aleh Tsyvinski, Xi Wu summarizes ten facts from the literature that show cryptocurrencies share important similarities with traditional markets—comparable risk-adjusted performance and a small set of cross-sectional factors—while retaining distinctive features such as frequent large jumps and price signals embedded in blockchain data. Key themes include portfolio diversification, factor structure, market microstructure, and the evolving role of regulation and derivatives in shaping market discovery and stability.

Currency strategies often appear simple on the surface – go long high-yielding currencies, short low-yielding ones, or take a position on the U.S. dollar. But these trades actually mix two distinct components: a Dollar component, which bets on broad movements of the U.S. dollar against all others, and a Cross-Sectional (CS) component, which exploits relative differences across countries. The question is, which of these components really drives currency risk premia? A new paper by Vahid Rostamkhani tackles this long-standing question by decomposing the predictive power of eleven macroeconomic fundamentals—such as interest rates, inflation, unemployment, and fiscal variables—into these two components across almost a century of data (1926-2023). This approach directly tests whether it is more rewarding to time the dollar itself or to focus on cross-country fundamental spreads.

Foreign exchange (FX) markets are a cornerstone of global finance, offering investors and corporations opportunities to manage currency risk, enhance returns, and optimize portfolio performance. Among the most critical challenges in FX is the design of robust hedging strategies to mitigate exposure to volatile currency movements. How does the financial industry deal with this task? We can draw inspiration from the paper written by Castro, Hamill, Harber, Harvey, and Van Hemert, which explores strategies such as dynamic hedging, trend-following, and momentum-based approaches, the concept of carry, and the interplay of these strategies with fundamental concepts like Purchasing Power Parity (PPP) and valuation metrics.