Beyond Fama-French Factors: Alpha from Short-Term Signals

WP version of Financial Analysts Journal, 2023, 79(4): 96-117. https://doi.org/10.1080/0015198X.2023.2173492

36 Pages Posted: 1 Jun 2022 Last revised: 15 Dec 2023

See all articles by David Blitz

David Blitz

Robeco Quantitative Investments

Matthias X. Hanauer

Technische Universität München (TUM); Robeco Asset Management

Iman Honarvar

Robeco Quantitative Investments

Rob Huisman

Robeco Quantitative Investments

Pim van Vliet

Robeco Quantitative Investments

Date Written: December 23, 2022

Abstract

Short-term alpha signals are generally dismissed in traditional asset pricing models, primarily due to market friction concerns. However, this paper demonstrates that investors can obtain a significant net alpha by applying a combination of signals to a liquid global universe and with advanced buy/sell trading rules that mitigate transaction costs. The composite model consists of short-term reversal, short-term momentum, short-term analyst revisions, short-term risk, and monthly seasonality signals. The resulting alpha is present in out-of-sample and post-publication periods, across regions, translates into long-only applications, is robust to incorporating implementation lags of several days, and is uncorrelated to traditional Fama-French factors.

Keywords: short-term signals, market frictions, portfolio construction, transaction costs, investments, market efficiency

JEL Classification: G11, G12, G14

Suggested Citation

Blitz, David and Hanauer, Matthias Xaver and Honarvar, Iman and Huisman, Rob and van Vliet, Pim, Beyond Fama-French Factors: Alpha from Short-Term Signals (December 23, 2022). WP version of Financial Analysts Journal, 2023, 79(4): 96-117. https://doi.org/10.1080/0015198X.2023.2173492, Available at SSRN: https://ssrn.com/abstract=4115411 or http://dx.doi.org/10.2139/ssrn.4115411

David Blitz

Robeco Quantitative Investments ( email )

Weena 850
Rotterdam, 3014 DA
Netherlands

Matthias Xaver Hanauer (Contact Author)

Technische Universität München (TUM) ( email )

Arcisstr. 21
Munich, D-80290
Germany

HOME PAGE: http://www.professors.wi.tum.de/fm/team/researcher/dr-matthias-hanauer-cfa/

Robeco Asset Management ( email )

Weena 850
Rotterdam, 3014 DA
Netherlands

HOME PAGE: http://www.robeco.com/en-int/about-us/matthias-hanauer

Iman Honarvar

Robeco Quantitative Investments ( email )

Rotterdam
Netherlands

Rob Huisman

Robeco Quantitative Investments ( email )

Weena 850
Rotterdam, Zuid-Holland 3014 DA
Netherlands

Pim Van Vliet

Robeco Quantitative Investments ( email )

Rotterdam, 3011 AG
Netherlands

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