Investing Research Articles

Are strategies that exploit return autocorrelation good places to look for complementary (diversifying) return streams? In the March 2017 version of their paper entitled “Momentum and Covered Calls almost Everywhere”, Stephen Choi, Gil-Lyeol Jeong and Hogun Park examine trend following and covered call strategies at the asset class level both separately and in combination. Their asset class universe… Keep Reading

Do very long samples clarify the role of aggregate dividend yield as a stock market return predictor? In their January 2017 paper entitled “Four Centuries of Return Predictability”, Benjamin Golez and Peter Koudijs examine whether aggregate dividend yield (dividend-to-price ratio) predicts stock market return in a pieced sample spanning four centuries. They test predictability in the… Keep Reading

Are aggregate commodity futures returns predictable based on prices across the maturity curve and/or on the state of the global economy? In her January 2017 paper entitled “Commodity Return Predictability”, Regina Hammerschmid investigates aggregate commodity futures return predictability based on variables incorporating information from the term structure of futures prices and several global economic variables. She… Keep Reading

Do factors widely used to model cross-sectional returns of U.S. stocks exhibit reward-for-risk behaviors? In other words, are expected factor returns higher (lower) when factor return volatility is high (low)? In their January 2017 paper entitled “The Risk-Return Tradeoff Among Equity Factors”, Pedro Barroso and Paulo Maio examine reward-for-risk behaviors of the size (small minus big market… Keep Reading

Are the returns of factors widely used to predict the cross-section of stock returns themselves predictable? In the January 2016 draft of his paper entitled “Equity Factor Predictability”, Ulrich Carl analyzes predictability of market, size (market capitalization), value (book-to-market ratio), momentum (returns from 12 months ago to one month ago), low beta (betting against beta) and quality… Keep Reading

How does the fact that many investments can go up more than they can go down interact with their optimal allocations? In their February 2017 paper entitled “What Our Market Return Forecasts Really Mean: Convexity in Equity Returns and its Implications for Investment Sizing”, Victor Haghani and James White examine how return convexity, return forecast and investment… Keep Reading

How attractive are purified factor portfolios, constructed to focus on one factor by avoiding exposures to other factors? In their January 2017 paper entitled “Pure Factor Portfolios and Multivariate Regression Analysis”, Roger Clarke, Harindra de Silva and Steven Thorley explore a multivariate regression approach to generating pure factor portfolios. They consider five widely studied factors: value (earnings yield);… Keep Reading

Do legal, policy and practical constraints on short selling substantially detract from factor investing performance? In their February 2017 paper entitled “Factor Investing: The Rocky Road from Long Only to Long Short”, Marie Briere and Ariane Szafarz examine how severely constraints on short selling affect the attractiveness of factor investing. They consider 11 assets consisting of the… Keep Reading

Which stock market factors and stock characteristics contribute significantly to portfolio performance when considered jointly (accounting for interactions) on a net basis (accounting for offsetting trades)? In their February 2017 paper entitled “A Portfolio Perspective on the Multitude of Firm Characteristics”, Victor DeMiguel, Alberto Martin-Utrera, Francisco Nogales and Raman Uppal investigate which of 51 stock factors/characteristics matter on a… Keep Reading

In their February 2017 paper entitled “Bayesian Model Averaging, Ordinary Least Squares and the Price of Gold”, Dirk Baur and Brian Lucey analyze a large set of factors that potentially influence the price of gold via two methods: Ordinary Least Squares (OLS, scatter plot) and Bayesian Model Averaging (BMA, accounting for model uncertainty). They include as potential influencers three other precious… Keep Reading