Gerstein Fisher’s investment approach is shaped and informed by academic research, including several seminal studies over the past six decades related to what drives portfolio returns.
Gerstein Fisher has long believed that informing our investment strategies with academic research allows us to deliver more sustainable, explainable results for our clients. The selection of academic studies and research papers below represent just some of the foundational research frameworks that have shaped the industry and played an influential role in our own approach to investing.
Modern Portfolio Theory (Harry Markowitz)
Markowitz’s work on risk-return optimization introduces the concept of ‘portfolios’ to investment management.
Capital Asset Pricing Model (Jack Treynor, William Sharpe, John Lintner, Jan Mossin)
A precursor to modern day factor models, this single-factor model helps explain the risk and return of a stock through its beta, i.e., its relation to the broad market.
The Relationship Between Return and Market Value of Common Stocks (Rolf W. Banz)
Seminal work on what is commonly referred to as the “small company effect”, demonstrating that small cap stocks have historically provided higher-than-average returns without a corresponding increase in risk.
The Arbitrage Pricing Theory Approach to Strategic Portfolio Planning (Richard Roll, Stephen A. Ross) (theory was proposed in 1976) Introduces a theorem that helps explain returns based on multiple macroeconomic factors such as inflation and interest rates.
Determinants of Portfolio Performance (Gary P Brinson et al) A groundbreaking study that reveals the criticality of the asset allocation decision in determining long-term portfolio returns.
Diversification Returns and Asset Contributions (Eugene Fama, David G Booth) Explains and quantifies the so-called “Diversification Effect”—why it is inadequate to look at the risk and return of an asset class in isolation and the benefits of adding low-correlating assets to the portfolio mix.
Common Risk Factors on Stocks and Bonds (Eugene Fama, Kenneth French) A foundational paper in modern investment management that attributes the return of stocks to size and value factors in addition to overall market risk.
Returns to Buying Winners and Selling Losers: Implications for Stock Market Efficiency (Narasimhan Jegadeesh; Sheridan Titman) A seminal paper that introduces momentum to the academic and investment community. It lays the foundation for two decades of research on momentum investing.
Facts and Fantasies about Commodity Futures (Gary Gorton, K Geert Rouwenhorst) One of the first extensive studies into the risk and return characteristics of commodity futures, including historical equity-like risk premia and significant portfolio diversification benefits.