Even As Equities Become More idiosyncratic, Alpha Remains Elusive

Looking at the world through a quantitative lens, Morgan Stanley’s Brian Hayes sees potentially lower returns ahead for the stock market and there is bad news in particular for hedge funds including equity market neutral and event driven strategies. Monitoring key spreads, and using free cash flow as a metric, he and his team determine that low growth stocks might be favored in the year ahead.

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Why has alpha been such an elusive factor for professional investors such as equity market neutral and other fundamental hedge fund strategies to find since 2010?

Morgan Stanley looks at the usual suspects – repressive central bank policies and passive investing – to find the...