VOL. XCIV, NO. 247
BOOK BREAKDOWN
NO ADVICE
Intermediate · 2011
What Works on Wall Street: A Guide to the Best-Performing Investment Strategies of All Time
by James P. O'Shaughnessy · Partly Dated
A data-driven, factor-investing playbook: test what has worked historically (value, momentum, size, yield, quality proxies), then implement diversified, rules-based multifactor portfolios with discipline and cost awareness.
Level
Intermediate
Strategies
4 types
Frameworks
5 frameworks
Rating
Target Audience
Ideal Reader
- Investors who like evidence, ranking models, and systematic rebalancing
- People building a quant/factor sleeve (even if the rest is index funds)
- Anyone who wants a practical bridge from 'factors exist' to 'here’s how to run them'
May Not Suit
- Readers who want a narrative stock-picking book with company stories
- Investors unwilling to follow rules through long underperformance stretches
- Anyone who cannot tolerate big drawdowns (factor portfolios can still drop hard)
Investor Fit
| Strategy | Quantitative · Value Investing · Growth Investing · Portfolio Management |
| Time Horizon | Long-term (5+ years) |
| Asset Focus | Equities |
| Math Level | Algebra |
| Prerequisites | Comfort with basic valuation ratios (P/E, P/S, P/B, EV-based multiples) · Basic portfolio concepts (diversification, rebalancing) · Willingness to implement systematic rules |
Key Learnings
- 1Many popular “rules” are noise; some have long-run edges (on a gross basis)
- 2Single-factor signals rotate in and out of favor; composites can be more robust than one metric
- 3Combining value + momentum is a recurring theme in best-performing strategies
- 4Avoiding the most expensive, most loved “glamour” stocks matters a lot
- 5Small-cap universes can amplify factor effects but also amplify trading costs and volatility
- 6Implementation is the real moat: discipline, diversification, turnover control, and patience
- 7Backtests can look clean; reality adds trading frictions, taxes, and capacity constraints
- 8Even strong strategies can suffer very large drawdowns—survival and sticking power matter
Frameworks (5)
Formulas (9)
Case Studies (2)
Severe bear markets as live stress tests
Takeaway
The model isn’t only about average return; survivability and discipline through crisis regimes are part of the edge.
Momentum inversion during emotional bear markets
Takeaway
Momentum can flip in sharp drawdowns; volatility controls and diversification help, but don’t eliminate crash risk.
Mental Models
- —Factor premia: systematic sources of return (value, momentum, size, yield, quality proxies)
- —Ranking beats thresholds: sort by percentiles/deciles and buy the best bucket
- —Composite scoring reduces reliance on any single fragile signal
- —Multifactor hurdles beat single-factor ranking
- —Rebalancing as a structural edge (and behavioral discipline)
- —Expectations matter: what’s popular and expensive tends to disappoint
Key Terms
No glossary terms documented for this book.
Limitations & Caveats
Keep in mind
- •Backtest-heavy: results can be distorted by data snooping and by ignoring trading frictions
- •Implementation details matter more than most readers expect (costs, liquidity, taxes, capacity)
- •Primarily U.S. equity focused; global generalization is not automatic
- •Accounting and market structure evolve; some signals can weaken as they become crowded
Reading Guide
Priority Reading
- Factor performance surveys (value, momentum, size, yield)
- Multifactor model construction (why and how to combine signals)
- Trading frictions / implementation caveats
- Sector and universe breakdowns (large vs small)
Optional Sections
- —Very detailed tables once you understand the main conclusions (use as reference later)
Ratings
Concept Tags
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