Beyond Fama-French Factors: Alpha from Short-Term Signals

David Blitz, Matthias X. Hanauer, Iman Honarvar, Rob Huisman and Pim van Vliet

Financial Analysts Journal, 2023, vol. 79, issue 4, 96-117

Abstract: Short-term alpha signals are generally dismissed in traditional asset pricing models, primarily due to market friction concerns. However, this paper demonstrates that investors can obtain a significant net alpha by applying a combination of signals to a liquid global universe and with advanced buy/sell trading rules that mitigate transaction costs. The composite model consists of short-term reversal, short-term momentum, short-term analyst revisions, short-term risk, and monthly seasonality signals. The resulting alpha is present in out-of-sample and post-publication periods and across regions, translates into long-only applications, is robust to incorporating implementation lags of several days, and is uncorrelated to traditional Fama-French factors.

Date: 2023
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DOI: 10.1080/0015198X.2023.2173492

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