Investing Research Articles

Does implied stock market volatility (IV) predict stock market returns? In their March 2018 paper entitled “Implied Volatility Measures As Indicators of Future Market Returns”, Roberto Bandelli and Wenye Wang analyze the relationship between S&P 500 Index IV and future S&P 500 Index returns. They consider volatilities implied either by S&P 500 Index options (VIX) or by 30-day… Keep Reading

Does rigorous re-examination of time series (intrinsic or absolute) asset return momentum confirm its statistical and economic significance? In their April 2018 paper entitled “Time-Series Momentum: Is it There?”, Dashan Huang, Jiangyuan Li, Liyao Wang and Guofu Zhou conduct a three-stage review of evidence for predictability of next-month returns based on past 12-month returns for a broad set of… Keep Reading

Data snooping bias is pervasive in published research and quantitative investment strategies. Should investors resign themselves to the consequence that investment managers/funds offer products picked mostly on past luck? In his May 2018 presentation package entitled “How the Sharpe Ratio Died, and Came Back to Life”, Marcos Lopez de Prado introduces an approach to Sharpe ratio estimation… Keep Reading

Should investors consider adding crypto-assets to portfolios of traditional assets? In their April 2018 paper entitled “Cryptocurrencies as an Asset Class?”, Sinan Krueckeberg and Peter Scholz investigate whether cryptocurrencies (crypto-assets) qualify as a distinct asset class, attractively diversifying portfolios of traditional asset classes. They distinguish between cryptographic coins (with their own blockchains) and tokens (using third party blockchains). They… Keep Reading

What is the interplay among investable proxies for the U.S. dollar, gold and crude oil? Do changes in the value of the dollar lead those in hard assets? To investigate, we relate the return series of three exchange-traded funds: (1) the futures-based PowerShares DB US Dollar Index Bullish (UUP); (2) the spot-based SPDR Gold Shares (GLD); and, (3) the… Keep Reading

Is there a tractable way of estimating the level of data snooping bias in investment strategy studies and thereby correcting for it? In their April 2018 paper entitled “Detection of False Investment Strategies Using Unsupervised Learning Methods”, Marcos Lopez de Prado and Michael Lewis summarize and validate an approach for estimating snooping bias derived from backtesting multiple strategies… Keep Reading

Do exchange-traded funds (ETF) exhibit unique calendar-based anomalies? In their April 2018 paper entitled “Evidence of Idiosyncratic Seasonality in ETFs Performance”, flagged by a subscriber, Carlos Francisco Alves and Duarte André de Castro Reis investigate calendar-based patterns of risk-adjusted returns and tracking errors for U.S. equity ETFs and compare findings to those of underlying indexes. They… Keep Reading

Is there a way to predict the value of a crypto-asset like Bitcoin? In their March 2018 paper entitled “An Equilibrium Valuation of Bitcoin and Decentralized Network Assets”, Emiliano Pagnotta and Andrea Buraschi model the value of Bitcoin and similar blockchain network tokens via a model that characterizes: Demand, described by current/future number of users and their strength… Keep Reading

Is use of a sampling interval much shorter than input variable measurement interval a useful statistical practice in financial markets research? In the April 2018 update of their paper entitled “Long Horizon Predictability: A Cautionary Tale”, flagged by a subscriber, Jacob Boudoukh, Ronen Israel and Matthew Richardson examine statistical reliability gains from overlapping measurements of… Keep Reading

How do housing, equities and government bonds/bills perform worldwide over the long run? In their February 2018 paper entitled “The Rate of Return on Everything, 1870-2015”, Òscar Jordà, Katharina Knoll, Dmitry Kuvshinov, Moritz Schularick and Alan Taylor address the following questions: What is the aggregate real return on investments? Is it higher than economic growth rate and, if so, by… Keep Reading