O’Shaughnessy Asset Management explores how traditional factor investing has become commoditized and argues that alpha now comes from identifying signals within factors, using buybacks as a case study. The paper suggests dispersion within buyback stocks is wide, challenging the idea that simple factor exposure is enough and highlighting the role of more nuanced data analysis.
O’Shaughnessy Quarterly Investor Letter Q3 2018
O’Shaughnessy Asset Management
Research
12 Pages
Key Takeaways
Buyback Dispersion Matters: High buyback firms show wide return spreads, with top performers significantly outperforming peers despite similar repurchase activity levels.
Peak Yield Relevance: Buybacks and dividends combined reached over 6% yield in some periods, reinforcing their growing role in total shareholder return.
Machine Learning Insights: Clustering techniques uncover non-linear relationships across dozens of variables, improving signal detection versus traditional single-factor models.
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