Investing Research Articles

Is selecting mutual funds based on strong performance over the last three years helpful (discovering fund manager skill) or harmful (signaling imminent fund strategy mean reversion)? In the February 2016 version of their paper entitled “The Harm in Selecting Funds that Have Recently Outperformed”, Bradford Cornell, Jason Hsu and David Nanigian investigate future mutual fund performance based on recent past performance relative… Keep Reading

Each year, Forbes calculates the performance of columnist recommendations assuming: (1) equal initial investments in each stock pick when published; (2) 1% trading friction for each purchase; and, (3) matching benchmark investments in the S&P 500 Index for each pick with no trading friction. Because matching benchmark investments are spread across the year, the benchmark… Keep Reading

Is outperformance of low-volatility stocks just a manifestation of the value premium (outperformance of stocks with high book-to-market ratios compared to stocks with low book-to-market ratios)? In his February 2016 paper entitled “The Value of Low Volatility”, David Blitz examines the interaction of the value premium with returns of long-only portfolios of low-volatility U.S. stocks over… Keep Reading

Financial market commentators and media sometimes cite the Economic Cycle Research Institute’s (ECRI) U.S. Weekly Leading Index (WLI) as an important economic indicator, implying that it is predictive of future stock market performance. According to ECRI, WLI “has a moderate lead over cyclical turns in U.S. economic activity.” ECRI publicly releases a preliminary (revised) WLI value with… Keep Reading

Can small (unconnected) investors compete in trades on economic news? In the February 2016 draft of her paper entitled “Is Someone Front-Running You Around News Releases?”, Irene Aldridge examines U.S. stock price, volatility and trading activity around ISM Manufacturing Index and Construction Spending news releases (which occur while the stock market is open). Media violations of… Keep Reading

Do alternative beta (factor-weighted) stock indexes present an exploitable advantage over traditional market capitalization weighting? In their February 2016 paper entitled “Alternative Beta Strategies”, Frank Benham, Roberto Obregon, Edmund Walsh and Timur Yontar analyze performance and practicality aspects of alternative beta stock indexes that target high value, high momentum, low volatility and high quality/profitability premiums. They also model multi-beta portfolios to assess the net benefits… Keep Reading

What are the best ways to buy or sell tail risk protection (crash insurance)? In his May 2015 paper entitled “Should You Buy or Sell Tail Risk Hedges? A Filtered Bootstrap Approach”, Lorenzo Baldassini uses filtered bootstrap simulations to estimate whether and how an investor can enhance an equity index return distribution (a buy-and-hold benchmark) by buying or… Keep Reading

Do reversal, momentum and reversion effects hold among German stocks? In his January 2016 paper entitled “Trading Strategies Based on Past Returns – Evidence from Germany”, Martin Schmidt examines the performance of short-term reversal, intermediate-term momentum, long-term reversion and seasonality strategies in the German stock market. The seasonal strategy considers one-month returns from multiples of 12 months ago…. Keep Reading

Do the 12 yearly signs of the Chinese Zodiac cycle (Rabbit, Dragon, Snake, Horse, Goat, Monkey, Rooster, Dog, Pig, Rat, Ox, Tiger) relate individually to stock market behavior? In their January 2016 paper entitled “The Zodiac Calendar and Equity Factor Returns”, Janice Phoeng and Laurens Swinkels calculate four annual equity factor returns for each of the Zodiac… Keep Reading

Does a time series (absolute or intrinsic) momentum strategy work at the stock level? In their January 2016 paper entitled “The Enduring Effect of Time-Series Momentum on Stock Returns Over Nearly 100-Years” Ian D’Souza, Voraphat Srichanachaitrchok, George Wang  and Yaqiong Yao test the significance of time series momentum among individual stocks. Their baseline time series momentum strategy consists of each… Keep Reading