Astra Capital Management builds portfolios constructed to account for decades of research by leading academics and extensive empirical data.
We emphasize tax-efficiency in our portfolio design, as tax inefficiency may make an investment with attractive pre-tax returns, undesirable after considering the impact of taxes.
Historically, certain attributes of stocks have demonstrated the tendency to outperform. These include:
• Size Premium: The historical tendency for smaller stocks to outperform larger stocks. Often referred to as SMB (Small Minus Big), or the difference between expected returns in smaller stocks minus the expected returns in larger stocks.
• Value Premium: The tendency for relatively cheap assets to outperform relatively expensive ones. Stocks with low BtM (Book-to-Market) ratios are considered growth stocks, and those with high BtM ratios are considered value stocks. Historically, value stocks have outperformed growth stocks.
• Momentum Premium: The tendency for an asset’s recent relative performance to continue in the near future. Historically, in aggregate, stocks that have had recent outperformance continue to outperform stocks that have shown recent underperformance.
When designing portfolios, we tend to overweight stocks that demonstrate these characteristics, while maintaining broad diversification.