Investing Research Articles

A subscriber asked how the “Simple Asset Class ETF Value Strategy” (SACEVS) performs when interest rates rise. This strategy seeks to exploit relative valuation of the term risk premium, the credit (default) risk premium and the equity risk premium via exchange-traded funds (ETF). To investigate, because the sample period available for mutual funds is much longer than that available for… Keep Reading

Do investors fixate on price-to-earnings ratio (P/E) and thereby create trading opportunities as P/Es change? In his June 2017 paper entitled “P/E Ratios and Value Investor Attention”, Jordan Moore examines market responses to U.S. common stocks sorted by earnings yield (inverse of P/E). He defines P/E as the ratio of stock price to the sum… Keep Reading

A subscriber asked for augmentation of “SACEMS at Weekly and Biweekly Frequencies” to determine whether bimonthly (every two months) measurement of asset class momentum works better than monthly measurement as used in “Simple Asset Class ETF Momentum Strategy” (SACEMS). To investigate, we apply a bimonthly strategy to the following eight asset class exchange-traded funds (ETF), plus cash:… Keep Reading

How well do stock index covered call strategies work across markets worldwide? In their June 2017 paper entitled “Covering the World: Global Evidence on Covered Calls”, Roni Israelov, Matthew Klein and Harsha Tummala test covered call strategies for 11 global equity indexes. They measure overall returns and return contributions from equity exposure, short volatility exposure and equity timing…. Keep Reading

Which short index options offer the best overall performance? In their June 2017 paper entitled “Which Index Options Should You Sell?”, Roni Israelov and Harsha Tummala explore return and risk properties of short delta-hedged out-of-the-money S&P 500 Index put and call options of various moneyness and maturities. They consider moneyness of -2.5 to +1.0 standard deviations relative to the… Keep Reading

Does time series (intrinsic or absolute) return momentum work everywhere all the time? In their June 2017 paper entitled “A Century of Evidence on Trend-Following Investing”, Brian Hurst, Yao Ooi and Lasse Pedersen investigate the robustness of intrinsic momentum across 67 assets over 137 years. Robustness tests address subperiods, market return/volatility states and economic conditions. They rely mostly… Keep Reading

Is recent Fama-French 5-factor alpha (accounting for market, size, book-to-market, profitability and investment risks) a useful predictor of U.S. equity sector performance? In other words, is there an alpha momentum anomaly at the sector level? In their June 2017 paper entitled “US Sector Rotation with Five-Factor Fama-French Alphas”, Golam Sarwar, Cesario Mateus and Natasa Todorovic examine 5-factor alphas of… Keep Reading

Do stock return momentum and reversal strategies work better when focused on certain intraday intervals rather than close-to-close, according to whether trades are primarily exploiting information or supplying liquidity? In his April 2017 paper entitled “Reversal, Momentum and Intraday Returns”, Haoyu Xu examines intraday versions of momentum and reversal anomalies, with focus on the first two… Keep Reading

Michael Covel prefaces the 2017 Fifth Edition of his book, Trend Following: How to Make a Fortune in Bull, Bear, and Black Swan Markets, by stating that: “The 233,092 words in this book are the result of my near 20-year hazardous journey for the truth about this trading called trend following. …Trend following…aims to capture the majority… Keep Reading

Do hedge funds demonstrate the exploitability of real-time economic data? In their June 2017 paper entitled “Can Hedge Funds Time the Market?”, Michael Brandt, Federico Nucera and Giorgio Valente evaluate whether all or some equity hedge funds vary equity market exposure in response to real-time economic data, and (if so) whether doing so improves their performance. Their proxy… Keep Reading