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Scott Cliff Asness

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171
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2015-02-21
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2015-02-21
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  1. “So another thing you can do is say, well, if this logic works to pick stocks in the US, doesn't work in Europe, doesn't work in Japan. All right, if it works for stocks around the world, doesn't work for bond markets, does it work for commodities? Does it work for currencies? So finding these things work for other things was both lucrative because you could do it in more places. But also very calming because it made you think there's a much smaller chance that you're just lucky.”

    2015-02-21 · Masters in Business · Masters in Business: AQR Scott Cliff Asness (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source

  2. “One great add a sample test is time. And it's now been 25 years since my dissertation. That's frightening to. Say out loud, and the stuff has held up. And that's a wonderful out of sample test. But when I'm, as you said, 29 at Goldman Sachs, a good career strategy was not, first we wait 25 years And if it works, we pounce.”

    2015-02-21 · Masters in Business · Masters in Business: AQR Scott Cliff Asness (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source

  3. “The Super Bowl effect is another example. Buy after the NFC, but not just the NFC or an old AFL season. Because they had adjusted for the Steelers who won annoyingly often. And it screwed up the rule. So there's no real cure for this, but there's something you can do. You can go look somewhere you haven't looked yet.”

    2015-02-21 · Masters in Business · Masters in Business: AQR Scott Cliff Asness (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source

  4. “To confirm that. At a sample refers to the following problem. If you give me enough data or anyone good with computers and statistics, I will find you something that has worked in the past. It might be total gibberish. One of the most famous ones is butter prices in Bangladesh, help predict the S&P. I could be mangling that, but it's something like that. No, I recall.”

    2015-02-21 · Masters in Business · Masters in Business: AQR Scott Cliff Asness (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source

  5. “If you put the two together, I would readily agree that value investing is highly related to the idea of mean reversion. Almost synonyms. If you add momentum in there, it's just, again, there are more that we do. But if that's the second one, we would say things without a doubt mean revert, but they get there eventually. They tend to keep going the same direction for at least a little while longer before they mean”

    2015-02-21 · Masters in Business · Masters in Business: AQR Scott Cliff Asness (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source

  6. “So both of those tend to work on average. So do other things like high quality, high profitability tends to beat poor profitability, low beta, low risk stocks tend to beat high risk stocks. To a quant, you want to trade those very diversified in as many places, not just for individual. I keep saying stocks, but I have to correct myself. But it's any asset class. Broadly, anything you can trade that's liquid and you have good data on, which both makes it a better investment because you can spread your bets more.”

    2015-02-21 · Masters in Business · Masters in Business: AQR Scott Cliff Asness (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source

  7. “I think when I wrote this dissertation for Gene Fama, who is both efficient markets and the value guru, I didn't say this is better than value. That would have been both wrong investing and bad graduation strategy. I said it complements value very well. They both make money. Value is a much slower turnover strategy. You often do find stocks, even though it doesn't sound common, you often find stocks that are still cheap, not as cheap as they were a year ago, but have good momentum.”

    2015-02-21 · Masters in Business · Masters in Business: AQR Scott Cliff Asness (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source

  8. “Yes. And this is a bit of a blow to the efficient market hypothesis. Maybe one day people will reconcile them. But that kind of shouldn't be. It's a little too easy. I call it the two newspaper strategy if you're only trading price momentum. You need a newspaper from today in a newspaper from a year ago.”

    2015-02-21 · Masters in Business · Masters in Business: AQR Scott Cliff Asness (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source

  9. “Which you mentioned I wrote my dissertation on things that are getting better relatively recent. That feels like the opposite of value, but very different timeframes. Say that again.”

    2015-02-21 · Masters in Business · Masters in Business: AQR Scott Cliff Asness (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source

  10. “Long term. We have found, along with others, this is not unique to us, a set of things that work, like value is one of them. I didn't choose the random example randomly. You got to be careful when I say work. I mean like a statistician, two out of three years, three out of four years, if your car worked like this, you'd fire your mechanic. You need an economic story why it works. I don't believe in just data. I believe in trying to understand why it works. And you need a lot of out-of-sample tests. For instance, in value and all the things we do, we have found it's not just individual stocks. We always end up discussing individual stocks, but cheap countries measured in an analogous way at the country level, cheap bond markets using real bond yield, slope of the yield curve, cheap currencies using purchasing power parity, cheap commodities using just commodities to press versus their long-term average. Anything we've looked at shows some tendency for cheap to beat expensive. Then other things exist. Momentum.”

    2015-02-21 · Masters in Business · Masters in Business: AQR Scott Cliff Asness (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source

  11. “But let me give you some examples if cheap stocks measured any of your favorite ways, price divided by earnings, cash flow, dividends, sales, tend to be at expensive stocks on average. On average, yes, on average over time, not always, not even close to always. I wish it was always. If they tend to win, and that's all you do and all you believed, you wouldn't bet on it by picking your three favorite cheap stocks and shorting your three least favorite expensive stocks. You believe in the average. You would do it with a very diversified portfolio of cheap, and you would sell or underweight, depending if it's a hedge fund or if it's a traditional portfolio, a very diversified portfolio of expensive, and you'd hope that your logic and your historical evidence repeated itself over the next”

    2015-02-21 · Masters in Business · Masters in Business: AQR Scott Cliff Asness (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source

  12. “Sure. There are some other people who will do quantitative techniques. I'll describe it very generally, and as it applies to us, quant investment managers are about, I would say, two words describing very well. They're about averages and they're about diversification. They're not about kind of the sexy side of here's my best stock pick. Sometimes I respond if people ask me, what's your favorite stock or what's your biggest holding? I look at them and go, I don't know, which is usually true and they get very confused because we own thousands of.”

    2015-02-21 · Masters in Business · Masters in Business: AQR Scott Cliff Asness (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source

  13. “First, there was total indecision. I took this. You mentioned my undergrad. I was an engineer in a business school student because I had no idea what I wanted to do. I was fairly mathematical. And my father read about this program, this dual degree program, and said, why don't you do this? You can decide later. That was the total amount of planning. I liked the finance. I found it intellectually interesting. And to be honest, you know, you never know. You look back when you were 20 and you try to figure out a few planned it or not. But I think I was attracted to the idea of something that I found intellectually fascinating that you could make an actual career out of that wasn't archaeology. I just upset all the archaeologists out there.”

    2015-02-21 · Masters in Business · Masters in Business: AQR Scott Cliff Asness (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source

  14. “We thought about starting our own firm. We had a whole bunch of three of us who were thinking about it. Should we do this? Should we not? We ended up spending almost all the time talking about what we should name it. And we came up with the IBM of firms, about the most boring name you can imagine. But it fits what we do exactly.”

    2015-02-21 · Masters in Business · Masters in Business: AQR Scott Cliff Asness (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source

  15. “But nobody pulls you, Doc. It's not Dr. Essence because it's massively pretentious for finance PH. Yes, it is. To use the word doctor. And I'm afraid you'll ask me to check your hern”

    2015-02-21 · Masters in Business · Masters in Business: AQR Scott Cliff Asness (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source

  16. “No, he kind of chooses you, and I got lucky and he chose me. He was one of the reasons I'd certainly heard of him, but less so than you can imagine. I was a little naive. I just walked around, said I want to study this more. Where should I go? Got the advice to go there. Took Jean's class. And then at the end of the first year, he asked somebody to TA this class next year. And I got lucky. He gave me the tap.”

    2015-02-21 · Masters in Business · Masters in Business: AQR Scott Cliff Asness (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source

  17. “Oh, it gets worse. I had to choose between Chicago and Stanford. They had precisely the same scholarship program for PH. Peache students get a good deal. We don't actually pay. It was exactly the same. And Chicago at that point, and probably still, was just an incredible program. I got advice from so many people saying, if you're serious about financing, can go to Chicago, go. But it was pretty hard not to go to Stanford.”

    2015-02-21 · Masters in Business · Masters in Business: AQR Scott Cliff Asness (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source

  18. “Because a dissertation saying momentum is terrible is a perfect phama dissertation. Right. You know, look at these fools following this to his credit, and this is actually, I think, a warm story. He has his opinions, but he is brilliant and he's open-minded. You don't change his mind, but he is very comfortable. He said, if it's in the data, write the paper.”

    2015-02-21 · Masters in Business · Masters in Business: AQR Scott Cliff Asness (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source

  19. “They had already done a lot of the pioneering work on value investing. And value investing, it's still a fight. It's still arguable whether it works because markets are irrational or whether it works because it's a risk premium of some kind. And we could spend a whole show talking about that. Momentum, I guess some people argue about it, but I think the literature is far stronger on the irrational side.”

    2015-02-21 · Masters in Business · Masters in Business: AQR Scott Cliff Asness (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source

  20. “Yes, that was with some trepidation. He and his co-author was also one of my advisors, Ken French, had already done a lot of work on value.”

    2015-02-21 · Masters in Business · Masters in Business: AQR Scott Cliff Asness (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source

  21. “People always ask me this you get it from the business school, you effectively major in whatever you wrote your dissertation in, but it's a generic business school PhD.”

    2015-02-21 · Masters in Business · Masters in Business: AQR Scott Cliff Asness (Audio) · IDENTIFIED FROM THE TRANSCRIPT · source