Alpha in Academia

The Medallion Fund averaged 66% a year for decades by hiring astrophysicists and mathematicians, not traditional Wall Street traders. They traded off rigorous, academic-style research. Every week, I break down a peer-reviewed paper into plain English so you don't have to.

There are currently no signs of AI replacing offshore workers in the Philippines and India:

The academic finance community is constantly publishing rigorous tests of these exact dynamics, but most retail traders completely ignore them. I started this newsletter to fix that. Every week, I break down a piece of peer-reviewed financial research.

If you look at the most successful fixed income and relative value trades in history, they aren't based on gut feelings or hot takes. They are built on deeply researched historical data and proven statistical relationships. (1/2)

@amalgamationcg That would be a great post. Thanks for the idea!

@AlphainAcademia another idea for you: post IPO performance of companies at different fundamentals (e.g., earnings growth, debt levels, margins)

Market participants on Polymarket see a 50% chance that the Iran War continues into May:

@amalgamationcg Discuss it in what way? More on that specific paper or just go over the post-earnings drift and biases there?

@AlphainAcademia Yo, a week or so ago you had a nice post about how post-earnings release perf depends on the call.. can you talk about post-earnings release perf the day after in premarket/start of market?

New research suggests that the tone of executives has predictive power for future stock performance. Vocal cues of assertiveness or nervousness predict significant stock moves. Portfolios built on high conviction tones generated between 40 and 70 bps over the following month.

A long term disruption to the Strait of Hormoz could have significant implications for oil markets:

Treasuries are wrapping up their best month in over a year, even with growing concerns about US fiscal responsibility:

Prediction markets can often be modeled as exotic options: digital options, corridor options, or one touch options. open.substack.com/pub/alphainaca…

Tariff rates have changed for many countries since the Supreme Court’s ruling and Trump’s invocation of Section 122:

I’ve always shun academic papers related to trading because I thought “if it made money they wouldn’t publish it” There is actually some great stuff out there and I admit I was closed minded and wrong

More: alphainacademia.substack.com/i/187992342/go…

Over a four year crisis window, these combined forces typically destroy about 31 percent of a bond portfolio's real value. As the authors conclude, "governments force bondholders to bear a substantial share of that fiscal burden" during these extreme spending shocks.

A new paper finds that during major wars, real returns on government bonds consistently collapsed and fell significantly below economic growth rates. When nations face unexpected spending needs, they don't raise taxes enough, and end up borrowing to cover their costs. (1/2)

My latest post explains why convexity exists in the price-yield relationship among bonds. We also dive into the convexity bias, and how it has been historically mispriced:

Financial Twitter is 90% engagement farming and subjective opinions. I wanted to build the 10% that is strictly data-driven. Alpha in Academia is dedicated to summarizing financial research that actually applies to modern markets. No hot takes. just statistical significance.

In Japan, Takaichi and the LDP hold a two-thirds majority in the lower house, which is the first time this has ever happened.

Paper Highlight: open.substack.com/pub/alphainaca…

The portfolio with the highest quintile of cyber score risk, P5, has a statistically significant average excess return of 1.44%. The study confirms that cyber risk is now a priced factor in asset returns, independent of standard characteristics like size or value. (2/2)

A new paper quantifies the “cyber risk” exposure of U.S. firms. The authors identify four distinct categories of threats, ranging from data manipulation to direct impact attacks, and find that a portfolio of high-risk firms significantly outperforms low-risk ones. (1/2)