Investing Research Articles

Are some types of cars attractive alternative investments? In their September 2018 paper entitled “My Kingdom for a Horse (or a Classic Car)”, Dries Laurs and Luc Renneboog investigate price determinants and investment performance of classic cars from veteran cars (built 1888-1907) through modern classics (1975-1990). They estimate returns and risks for several classic car price indexes… Keep Reading

In response to “SACEMS with SMA Filter”, a subscriber suggested instead crash protection via momentum breadth (proportion of assets with positive momentum) by: Switching to 100% cash when fewer than four of eight Simple Asset Class ETF Momentum Strategy (SACEMS) non-cash assets have positive past returns. Scaling from cash into winners when four to eight risk assets… Keep Reading

A subscriber inquired about a “hot hand” strategy that each year picks the top performer from a family of diversified equity mutual funds (not including sector funds) and holds that winner the next year. To evaluate this strategy, we consider Vanguard diversified equity mutual funds with inceptions no later than September 2011. The test period is… Keep Reading

Do investors systematically undervalue stocks that have relatively large book-to-market fluctuations? In their December 2018 paper entitled “The Value Uncertainty Premium”, Turan Bali, Luca Del Viva, Menna El Hefnawy and Lenos Trigeorgis test whether book-to-market volatility relates positively to future returns. They specify book-to-market volatility as standard deviation of daily estimated book-to-market ratios divided by their average over the past 12… Keep Reading

Below is a weekly summary of our research findings for 1/22/19 through 1/25/19. These summaries give you a quick snapshot of our content the past week so that you can quickly decide what’s relevant to your investing needs. Subscribers: To receive these weekly digests via email, click here to sign up for our mailing list.

Might purveyors of trading strategies be presenting performance results biased by stopping them when falsely successful? In other words, might they be choosing lucky closing conditions for reported positions? In the December 2018 revision of their paper entitled “p-Hacking and False Discovery in A/B Testing”, Ron Berman, Leonid Pekelis, Aisling Scott and Christophe Van den Bulte investigate whether online A/B… Keep Reading

Failure rate, the conventional metric for evaluating retirement portfolios, does not distinguish between: (1) failures early versus late in retirement; or, (2) small and large surpluses (bequests). Is there a better way to evaluate retirement portfolios? In their December 2018 paper entitled “Toward Determining the Optimal Investment Strategy for Retirement”, Javier Estrada and Mark Kritzman propose coverage ratio,… Keep Reading

Do unconventional portfolio construction techniques obscure how, and how well, betting against beta (BAB) works? In their November 2018 paper entitled “Betting Against Betting Against Beta”, Robert Novy-Marx and Mihail Velikov revisit the BAB factor, focusing on interpretation of three unconventional BAB construction techniques: Rank weighting of stocks – BAB employs rank weighting rather than equal or value weighting,… Keep Reading

Below is a weekly summary of our research findings for 1/14/19 through 1/18/19. These summaries give you a quick snapshot of our content the past week so that you can quickly decide what’s relevant to your investing needs. Subscribers: To receive these weekly digests via email, click here to sign up for our mailing list.

The Simple Asset Class ETF Momentum Strategy (SACEMS) each month picks winners based on total return over a specified ranking (lookback) interval from the following eight asset class exchange-traded funds (ETF), plus cash: PowerShares DB Commodity Index Tracking (DBC) iShares MSCI Emerging Markets Index (EEM) iShares MSCI EAFE Index (EFA) SPDR Gold Shares (GLD) iShares Russell 2000… Keep Reading