Investing Research Articles

Does intricate optimization of the relationship between past month-by-month returns and future month-by-month returns substantially outperform a simple stock return momentum strategy based on some fixed past return interval? In their March 2016 paper entitled “Tree-Based Conditional Portfolio Sorts: The Relation between Past and Future Stock Returns”, Benjamin Moritz and Tom Zimmermann apply the machine learning concept of tree-based conditional portfolio sorts to… Keep Reading

Can an approach that describes each asset class as a bundle of sensitivities to economic/market conditions improve investment decision-making? In their March 2016 paper entitled “Factor-Based Investing”, Pim Lausberg, Alfred Slager and Philip Stork develop a “heat map” to summarize how returns for seven asset classes relate to six economic/market factors. The seven asset classes are: (1) government bonds; (2) investment grade corporate… Keep Reading

Can simple moving average (SMA) rules tell investors when it is prudent to leverage the U.S. stock market? In their March 2016 paper entitled “Leverage for the Long Run – A Systematic Approach to Managing Risk and Magnifying Returns in Stocks”, Michael Gayed and Charles Bilello augment conventional U.S. stock market SMA timing rules by adding leverage while in equities…. Keep Reading

Subscribers have requested extension of the momentum ranking interval robustness test in “Simple Asset Class ETF Momentum Strategy Robustness/Sensitivity Tests” to portfolios other than the momentum winner (Top 1), which each month ranks the following eight asset class exchange-traded funds (ETF), plus cash, on past return and rotates to the strongest class: PowerShares DB Commodity Index Tracking (DBC) iShares MSCI… Keep Reading

 “Pervasiveness and Robustness of SMA Effectiveness for Stocks” summarizes research finding that applying a simple moving average (SMA) trading strategy to U.S. stock portfolios produces strong risk-adjusted performance. This strategy is in stocks (cash) when price is above (below) its SMA. Is this finding valid? In his March 2016 paper entitled “Revisiting the Profitability of Market Timing with Moving… Keep Reading

Does a simple countercyclical (contrarian) asset class allocation rule work well, wherein an investor assumes that a relatively high aggregate allocation to an asset class signals relatively low/risky future returns for that class? In his February 2016 paper entitled “Understanding Modern Portfolio Construction”, Cullen Roche reviews the principles of investing and portfolio construction and examines a… Keep Reading

In the introductory text for Part I of their 2016 book, Adaptive Asset Allocation: Dynamic Global Porfolios to Profit in Good Times – and Bad, Adam Butler, Michael Philbrick and Rodrigo Gordillo state: “…we have come to stand for something square and real, a true Iron Law of Wealth Management: We would rather lose half our clients during a raging… Keep Reading

Should investors trust retirement planning tools that are publicly available on financial websites? In their February 2016 paper entitled “The Efficacy of Publicly-Available Retirement Planning Tools”, Taft Dorman, Barry Mulholland, Qianwen Bi and Harold Evensky: Identify via theoretical analysis and a survey of financial professionals the demographic, financial and economic variables important as inputs to retirement planning. Assess… Keep Reading

How should investors assess the risk of financial advisor misconduct? In their March 2016 paper entitled “The Market for Financial Adviser Misconduct”, Mark Egan, Gregor Matvos and Amit Seru investigate the recent extent of misconduct among registered financial advisors (“advisors”) and financial advisory firms in the U.S. Their data include employment history, customer disputes, disclosed investigations and disciplinary events (civil, criminal… Keep Reading

Can individual investors easily mimic the asset allocation strategies, and thereby the returns, of university endowments? In his March 2016 paper entitled “Invest Like an Endowment”, Drew Knowles reviews the asset allocation policies and resultant investment returns of those college and university endowments who volunteer such data to the National Association of College and University Business Officers (NACUBO). He… Keep Reading