Free Research Paper · 17 Pages

How sector tilts and stock picks each contribute, and what time does to both.

A 25-year empirical study of the Advising Alpha model portfolios, applying the Brinson-Hood-Beebower attribution framework to decompose alpha into its two real sources.

Seventeen pages. Brand-designed. Print-ready for your desk. Read it once and the math behind active equity returns becomes clearer than most retail investors will ever see it.

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Why this matters

Most retail investors are arguing with the wrong question.

Stock pickers say sector allocation is noise; what matters is the specific names you own. Index advocates say stock picking is wasted effort; just buy the broad market and stop trying. Both views are too simple, and the truth in the middle is the most interesting question in active management.

We took 25 years of our own model-portfolio history and decomposed every percentage point of outperformance into the two layers that actually drive it. The answer is not what either side of the popular debate would tell you.

What’s inside

Seventeen pages of evidence, framework, and time math.

The 25-year alpha decomposition for all four AA portfolios

Core 20, Market Masters, Tepper Tactical, and BioTech 10. For each portfolio, the actual cumulative return, the Sector Mirror return (same sector tilts via SPDR ETFs), and the S&P 500 baseline over the full backtest window.

The Brinson-Hood-Beebower framework, in plain language

The pension-fund attribution research from 1986 that anchored modern portfolio theory. Adapted for an all-equity portfolio: how alpha decomposes into sector allocation versus stock selection within sectors.

The compounding table at 1, 5, 10, and 25 years

What $10,000 turns into at each horizon across the S&P 500, the Sector Mirror, Core 20, and Tepper Tactical. The honest reframe of why time horizon matters more than any single year of performance.

The methodology behind every number

How we walked every historical rebalance, classified every holding by GICS sector, built the parallel sector-mirror portfolio, and chained returns through every window. With caveats stated honestly, not buried in a footnote.

The institutional-flow stock-picking methodology

Why the selection alpha exists at the magnitudes it does. The 13F filing cycle, how we screen for stocks with documented institutional support, why this matters for interpreting any selection-alpha number.

The Sector Alpha free model portfolio explained

Once you understand why sector tilts compound, the free model portfolio that follows Core 20's tilts in SPDR sector ETFs makes immediate sense. Quarterly trade list, free for all signed-in members.

The headline finding

“Sector allocation alone beats the S&P 500 by 230 to 571 percentage points over the full backtest. Stock selection within those sectors adds another 1,151 to 8,890 percentage points. Both layers earn their keep. Time amplifies each into outcomes that compound visibly different from passive index investing.”

From the executive summary

About Advising Alpha

You don’t have to be a stock market guru to invest like one.

Advising Alpha helps serious investors stop guessing and start growing. We show you what’s actually working on Wall Street through time-tested model portfolios, weekly briefs that cut through the noise, and the discipline to compound through every market.

This research paper is one of the free tools we publish to help investors and advisors think more clearly about how active equity returns actually work. The Sunday Brief, also free, lands every week with new context, commentary, and a fresh look at where the market sits.

Why we’re a publisher, not a Registered Investment Adviser →

Get the paper. Read it once. Keep it for the next time someone tells you stock picking is dead.

Free. Unsubscribe anytime. Seventeen pages of evidence-grade argument from a publisher that does its own research.