Investing Research Articles

Do retail investors tend to underprice equity options in monthly series when the interval between expirations from third Friday to third Friday is five weeks instead of the more frequent (65% versus 35%) four weeks? In their November 2016 paper entitled “Inattention in the Options Market”, Assaf Eisdorfer, Ronnie Sadka and Alexei Zhdanov examine differences in U.S…. Keep Reading

Does a simple volatility-based risk management approach substantially enhance performance of a Betting-Against-Beta (BAB) strategy (long stocks with low market beta and short stocks with high market beta)? In their November 2016 paper entitled “Managing the Risk of the ‘Betting-Against-Beta’ Anomaly: Does It Pay to Bet Against Beta?”, Pedro Barroso and Paulo Maio examine a BAB risk management strategy… Keep Reading

Is there pervasive yield momentum among U.S. corporate bonds? In their November 2016 paper entitled “Is Momentum Spanned Over Corporate Bonds of Different Ratings?”, Hai Lin, Chunchi Wu and Guofu Zhou investigate whether momentum exists in all segments of the U.S. corporate bond market. Their approach to momentum measurement is unconventional, involving cross-sectional regression of bond returns on… Keep Reading

Does a flexible robo advisor (offering automated, passive investment strategies tailored to investor situation/preferences) perform well in comparison to mutual fund/stock portfolios they might replace? If so, what inhibits investors from switching to them? In their November 2016 paper entitled “Robo Advisers and Mutual Fund Stickiness”, Michael Reher and Celine Sun compare actual mutual fund/stock portfolios held… Keep Reading

Does trading in exchange-traded funds (ETF) by authorized participants (who may create and redeem ETF shares by exchanging underlying assets) predict associated ETF returns? In their November 2016 draft paper entitled “ETF Arbitrage and Return Predictability”, David Brown, Shaun Davies and Matthew Ringgenberg examine the relationship between ETF share creation/redemption and ETF returns. For their principal analysis,… Keep Reading

Do changes in the dollar-euro exchange rate reliably interact with the U.S. stock market and gold? For example, do declines in the dollar relative to the euro indicate increases in the dollar value of hard assets? Are the interactions coincident or exploitably predictive? To investigate, we relate changes in the dollar-euro exchange rate to returns… Keep Reading

Is there a unique stock risk factor associated with expectations of a bear market? In the November 2016 version of their paper entitled “Bear Beta”, Zhongjin Lu and Scott Murray relate a put option-based indicator of the risk that the U.S. equity market will enter a bear state to individual stock returns. This indicator is based on two… Keep Reading

Is there a way to tell which corporate executives are manipulating earnings? In their November 2016 paper entitled “Expectations Management and Stock Returns”, Jinhwan Kim and Eric So examine the relationship between firm incentives to manage earnings and stock returns around earnings announcements. They define an expectations management incentives (EMI) indicator that combines three groups of incentives: Attention… Keep Reading

How well does the Morningstar fund rating system (one star to five stars) work? In their November 2016 paper entitled “The Morningstar Rating for Funds: Analyzing the Performance of the Star Rating Globally”, suggested for review by a subscriber, Jeffrey Ptak, Lee Davidson, Christopher Douglas and Alex Zhao analyze the global performance of star ratings in terms of ability to predict… Keep Reading

Bitcoin is a currency based on cryptographic proof rather than traditional trust, with transactions taking place directly between users and recorded in a distributed public ledger. How wild is the exchange rate for this new form of currency? In their November 2016 paper entitled “A Statistical Risk Assessment of Bitcoin and Its Extreme Tail Behaviour”, Joerg Osterrieder and Julian Lorenz… Keep Reading