Matthias Hanauer

📢 NEW PAPER OUT! 🚀 We analyze 1,056 #ML models to uncover how key design choices—algorithm, target, feature, & training—affect strategy returns. Key takeaways: 📈 Returns vary widely; see graph below! 🔍 NSE exceed SE by 59% 💡Check out which ML design choices really work 👇

@SSRN Sounds interesting. A bit similar to our NSE in ML models paper. papers.ssrn.com/sol3/papers.cf…

This paper shows #AI agents don’t agree: 150 autonomous coding agents given the same data produce large “nonstandard errors” from divergent analytical choices. Exemplars reduce dispersion by up to 99%, highlighting a new frontier in empirical uncertainty. spkl.io/6014A2CWg

The Illusion of the Carbon Premium Carbon that has not yet been emitted should not be used to predict stock returns. While this sounds obvious, prior research papers has done exactly that. This critical observation forms the basis for the Robeco Institutional Asset Management research team's re-examination of the relationship between climate risk and asset pricing. Investors and academics alike have sought to understand how environmental factors influence stock returns, often assuming that higher emitters command a risk premium. However, the timing of data availability is crucial in quantitative strategy formation, and misalignments here can lead to spurious conclusions about the pricing of carbon emissions. quantpedia.com/the-illusion-o… #esg #carbon #StockPicks

@systvest @Greenbackd How do you define ROIC? If you ask five different analysts, portfolio managers, or investors how to calculate ROIC exactly, you’ll likely get six different definitions! 😉

@HanauerMatthias @Greenbackd I ask myself if it's a construction problem. Sure thing. In cap-weighted S&P1500, I believe blindly that ROIC is the winner in recent decades. But how much of that is just industry- and megacap-specific trends?

ROIC, and ROA and ROE are the strongest predictors of stock performance. Each measures how efficiently a company converts capital into profits. Interest Coverage (EBIT / interest expense) captures financial strength and ability to service debt. Markets reward companies that: • generate high returns on capital • are financially resilient • require less capital to grow This is essentially the economic moat + capital efficiency signal. Gross margin is the weakest quality metric.

@systvest @Greenbackd Gross margin is indeed rather weak. Gross profitability (gross margin * asset turnover) is stronger. In my research, I typically find the best results for profitability measured between top and bottom line and rather in cash than in accounting terms.

@Greenbackd Still ... I kinda feel this in conflict with research by others. Maybe I am missing the point but this feels off... Cc @HanauerMatthias x.com/i/status/16827…

@ReneSellmann The question is rather why high quality should give you a premium? 👉 sciencedirect.com/science/articl…

This is my favorite chart from last year ⬇️ In a nutshell, clearly not all "Quality" is created equal. Since 1985, the "most alpha" has been found in two places: ✅ Capital Efficiency: ROIC, ROE & ROA ✅ Solvency: Interest & Debt Coverage Buying "High Gross Margin" sounds sexy, but the market rewards those who actually generate returns on their capital.

@choffstein Return stacking everywhere! 😉

Uh... no. This is not stacking. This is "mixing" versus "integrating". As it has been consistently called since like 2016. In fact, here's RA calling it exactly that in 2018: researchaffiliates.com/publications/a…

@chigrl We see a RenAIssance of the tangible economy! x.com/HanauerMatthia…

Goldman Team Says Asset-Heavy Stocks Outperform on AI Fears Investors are increasingly turning to stocks with what the strategists called the “HALO effect,” for heavy assets and low obsolescence, in sectors like utilities, basic resources and energy, the team including Guillaume Jaisson said in a client note. ASML Holding NV, Safran SA, LVMH, Air Liquide SA and Airbus SE are among stocks the team selected in a basket of European capital intensive names. L’Oreal SA, Adyen NV, DSV AS and Siemens Healthineers AG are a few of those in the capital light basket. “Markets are rewarding capacity, networks, infrastructure and engineering complexity—assets that are costly to replicate and less exposed to technological obsolescence,” Jaisson wrote. (Bloombereg)

New paper: The Illusion of the Carbon Premium Carbon that has not yet been emitted should not be used to predict stock returns. While this sounds obvious, prominent prior research has done exactly that. What happens when using only emissions data available to investors at the time of portfolio formation? Read the full paper on @SSRN : papers.ssrn.com/sol3/papers.cf…

@business So are we seeing the RenAIssance of the tangible economy? robeco.com/en-int/insight…

Goldman Sachs is pushing shares of capital-intensive companies such as utilities and miners as a haven from AI disruption bloomberg.com/news/newslette…

@opinion @johnauthers The Mag7 now spend more on CAPEX than on R&D. x.com/HanauerMatthia…

The stock market is undergoing a rotation of rare intensity on concern that the AI buildout is being taken too far, @johnauthers writes bloomberg.com/opinion/newsle…

The RenAIssance of the tangible economy The Mag7 now spend more on CAPEX than on R&D. This may create both risks and opportunities: 📉 Costly overinvestment could lower future returns 🏰 But AI CAPEX could reinforce competitive moats robeco.com/en-int/insight… #MarketingCommunication #CapitalAtRisk

@business @annerquaye @johnauthers @opinion Must have been movements in interest rates (duration argument).... ah, no, rates were going down 😉

Does tech’s sudden loss of momentum reflect more than a passing pause, ask @annerquaye and @johnauthers. Investors want more convincing evidence (via @opinion) bloomberg.com/opinion/newsle…

@J3ffMiller @CliffordAsness Shorting fees went to the moon

@HanauerMatthias @CliffordAsness I was assured we were going "to the moon!!" What happened?

Five years ago, the #MemeStock frenzy drove markets crazy. Five years on, the most heavily shorted stocks have underperformed, making 2021 look like a short-lived blip. Or is the #MOASS still coming? #MarketingCommunication #CapitalAtRisk

@Prashanth_Krish Someone has to short; the composition of the shorted stocks changes each month.

@HanauerMatthias very few Hedge Funds I assume have stayed the course the whole time. Way too painful and better to cut the losses and move on

The Mag7 make up ~25% of MSCI World. Not the first time a handful of names dominate (remember Cisco, Nokia, Lucent?). They shape the benchmark, but they don’t have to shape your alpha. Our systematic, benchmark-aware process taps the long tail instead. robeco.com/en-int/insight…

@QCompounding For those interested in the performance of the “Magic Formula” but also other popular investing formulas, please check out our paper “Formula Investing”. 🔗 papers.ssrn.com/sol3/papers.cf…

Joel Greenblatt averaged 40% annual returns. Not once. Not twice. But for over 20 years! He shared his exact method in The Little Book That Still Beats the Market. Here are the 10 biggest lessons:

What is your take on quant investing for the next five years?

In contrast, benchmark-aware approaches that take many diversified bets based on a strong quantitative model, where value is just one of many elements, have benefited from value exposure while maintaining balanced overall risk. Taken together, these charts show that value is not dead. But they also remind us that quant investing is much more than value alone. It is about combining robust signals, continuous innovation, and adapting to new market situations.

Value is not dead, but quant is more than value! To the day five years ago, the announcement of the successful Pfizer-BioNTech COVID-19 vaccine candidate results triggered a major market rotation. Since then, the average #value stock has outperformed the average growth stock. Below, I share four graphs showing how value has evolved since the “vaccine day.” 1️⃣ Long-term performance The enhanced value strategy in global equity markets, as defined in my paper with David Blitz (Resurrecting the Value Premium), has delivered solid long-term returns despite the challenging 2018–2020 period. The Pfizer-BioNTech news on 9 November 2020 marked the turning point. The shaded area presents out-of-sample data after posting the value paper on SSRN in October 2020 (papers.ssrn.com/sol3/papers.cf…).