Investment Paper Competition – $10,000

We’ve had at least one blog reader win this, let’s get another!

The National Association of Active Investment Managers (NAAIM) has issued a call for papers for the2012 Wagner Award for Advances in Active Investment Management. $10,000 will be awarded to the author of the best paper with $3,000 and $1,000 awards to the second and third place entries.

The grand prizewinner will be invited to present his / her paper at the NAAIM annual conference: “NAAIM Uncommon Knowledge 2012,” May 7-9, 2012 at the Intercontinental Buckhead Atlanta in Georgia. Free conference attendance, U.S. air travel and lodging will be provided. Top papers will be placed on the NAAIM website and promoted nationally in the investment media.

The Wagner Award is designed to promote validity of active investment management through substantive papers that cover an innovative topic in the area of active investing. This can be either a documented and justified investing approach or an exploration into the validity of active investing. Active investing topics can involve making investment decisions using technical analysis, quantitative analysis, etc. Papers can also address related topics such as position sizing techniques, money management approaches, scaling into and out of trades, exit strategies, etc.

Papers must be of practical significance to practitioners of active investing. Submissions should be up to 30 pages in length with a required 750-1000 word abstract and must be submitted electronically to: by January 1, 2012 to qualify for the competition. Awards will be announced by March 1, 2012.

As a judge of the 2010 and 2011 Wagner Awards, Chairman of the 2012 Wagner Award Committee Greg Morris’ advice to authors of Wagner Award submissions is to keep in mind Occam’s Razor (Occam stated that the simpler of two theories was probably the better theory), and the words of Albert Einstein, “In my view, such more complicated systems and their combinations should be considered only if there exist physical-empirical reasons to do so.”


“In my experience, complexity brings risk and higher probability of failure,” Morris explained. He is the chairman of the investment committee and chief technical analyst for Stadion Money Mangement.


2012 will be the fourth consecutive year NAAIM has offered the $10,000 Wagner Award. Previous winners include:

  • 2011 – German Quantitative Trader and Software Programmer, Thomas Krawinkel for “Buying Power – The Overlooked Success Factor”
  • 2010 – New Zealand statistician Tony Cooper, founder of Double-Digit Numerics, for “Alpha Generation and Risk Smoothing using Volatility of Volatility”
  • 2009 – Justin Lent, an independent trader and quantitative consultant, for “Tactical Equity Allocation Model (T.E.A.M.)”

Download Call for Entries with competition rules

Read Prior Wagner Award submissions 


For more information, visit or contact NAAIM administrator Susan Truesdale or 888-261-0787.


I am going to be doing a bit of travel this fall, drop me a line if you’re around and want to meetup!

San Francisco, Sep 12-15

Tahoe area, Sep  15-18

Europe, mid/late Oct (Germany, plus maybe a few other stops not finalized yet)

NYC, Nov 7-11

What if Newton was a Trendfollower?

Below is the 4th issue of Cambria Quantitative Research (I removed “monthly” from the title since the schedule is a bit erratic).  It was a fun paper to write, and goes to show there’s nothing new in investing.  As always, the most important rule is to always survive to invest another day.

I like to get these out as soon as I write them so if you find any errors or omissions let me know your thoughts!

As always, you can find my white papers for free on the SSRN and on the right hand bar on the blog.  Click the title below to download.  (And if you can’t figure out how to download it you click “one-click download” and make sure any pop up blockers are disabled.)


Investment manias and financial bubbles have likely existed for as long as humans have been involved in financial markets. In this research piece we take a look at some of the more famous market bubbles in history and the extreme volatility and drawdowns they experienced. We then examine a simple trendfollowing approach investors could use to manage their risk. Across twelve market bubbles we find that a trendfollowing system would have improved return while reducing volatility. Most importantly, it would have reduced drawdowns significantly leading to the most important rule in all of investing – surviving to invest another day.

The Japan Playbook

Remember back in March when everyone was talking about the US bond bubble?  Commentators like Taleb were making statements such as “every single human should short treasuries” and even the bond king Bill Gross was shorting them.    However, we did a post on how this was the largest drawdown for the US long bond EVER and historically that was a great time to buy into an asset class (When Things go on Sale, People Run out of the Store).

What has happened since the early 2011 lows?  The long bond zeros have had a stunning 50% rally.  Now who says bonds are boring?  (Here is an older post on bond math: Returns to bonds vs. changes in interest rates. )

Now many people are thinking about what to do with their bond holdings after this rally…it is instructive to take a look a Japan and how their bonds have performed as we think that is one of the best comparisions.  If you align the Japan series starting in 1990 and the US in 2000 you have a similar trend in interest rates.  The interesting thing to note is that after initally crossing below 2% JGBs have not risen above that ceiling for the past 10 years.  Nor has their yield curve ever gone negative in the past 20 years.  Japanese bonds have returned over 30% since initially crossing below 2% and Japanese stocks have had negative returns over the period…

Food for thought and a reminder that every asset class is great sometimes (gold, swiss franc and bonds recently) and horrible other times (financials, real estate and oil recently).

For more on the subject check out our recent research piece on pension funds and the endowment model in Japan:  “What if 8% is Really 0%?





New Reads In the Mail by Kahneman, Friedman, and Lewis

I was chatting with Antti Ilmanen the other day about some dividend papers and realized I had never read his recently published book Expected Returns .  Wow, big mistake.  While I am not finished yet (it is a loooong and dense 500 pages) it is a wonderful summary melding together historical asset returns with forecasting indicators and common sense.  A great read (with lots and lots of references for future reads in the source notes) for any practicioner in the financial markets.

Also in the mail or pre-ordered:

Thinking Fast and Slow - Daniel Kahneman

That Used to Be Us – Thomas Friedman

Boomerang, Travels in the New Third World – Michael Lewis

What Works on Wall St. (New edition) – O’Shaughnessy

Shiller CAPE and Inflation

As a follow up to my Shiller PE post from a couple weeks ago, here are some charts that simply look at the Shiller CAPE vs. 12 month trailing inflation.  As you can see, inflation of around 1% to 4% is rewarded with the highest multiples, but once you stay outside those bands watch out for some serious multiple contraction.

Charts inspired by the great book The Era of Uncertainty by Francois Trahan.  All data from the Shiller Dataset.

More reading here:

Shiller CAPE

Hussman models here

dShort and Butler Philbrick

Stock Market Valuation Models









13F Rebal Time

With all the 13Fs filed and published, AlphaClone and MarketFolly have been cranking away and should be fully updated.

Jay’s Hedge Fund Wisdom is out with a new issue.  (Here is a free past issue.)

Not surprising, but Icahn, Sprott, and Hayman clones all doing well YTD.  AlphaClone new funds added:

  1. Hawkins Capital
  2. Dialectic Capital Management
  3. Horseman Capital Management
  4. Steadfast Capital Management
  5. Peconic Partners
  6. Standard Pacific Capital
  7. Driehaus Capital Management
  8. Deerfield Management
  9. Centerbridge Partners
  10. Spinnaker Capital

All the Stocks and Bonds in the World…$212 Trillion

Nice graphic from McKinsey’s Report “Mapping Global Capital Markets” 2011 here:

Where the Black Swans Hide and the Ten Best Days Myth

It’s been a little slow with Cambria Quantitiative Research Monthly (more like quarterly), but here is the third issue (and the fourth should be close behind).  It happens to be a bit timely with the recent market action.  Hopefully it gives a little color on why volatility is exploding and some ideas on what to do (or not do) about it.

Let me know your thoughts!

As always, you can find my white papers for free on the SSRN.  Click to download.  (And if you can’t figure out how to download it you click “one-click download” and make sure any pop up blockers are disabled.)

Where the Black Swans Hide and the Ten Best Days Myth


Below we examine market outliers in financial markets. How much effect do these outliers have on long term performance? Can the investor prepare for these anomalies, or are they truly ‘black swans’ that cannot be managed? In this issue we examine numerous global financial markets on daily and monthly time frames. We find that these rare outliers have a massive impact on returns. However, these outliers tend to cluster and the majority of both good and bad outliers occur once markets have already been declining. We critique the “missing the 10-best-days” argument proffered by advocates of buy and hold investing, demonstrating that a significant majority of the 10 best days and the 10 worst days occur in declining markets. We continue to advocate that investors attempt to avoid declining markets where most of the volatility lies, and conclude that market timing and risk management is indeed possible, and beneficial to the investor. 


A Little Humor for Volatile Times

Gotta hand it to the NYPost…




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