Investing Research Articles

How well does the Morningstar fund rating system (one star to five stars) work? In their November 2016 paper entitled “The Morningstar Rating for Funds: Analyzing the Performance of the Star Rating Globally”, suggested for review by a subscriber, Jeffrey Ptak, Lee Davidson, Christopher Douglas and Alex Zhao analyze the global performance of star ratings in terms of ability to predict… Keep Reading

Bitcoin is a currency based on cryptographic proof rather than traditional trust, with transactions taking place directly between users and recorded in a distributed public ledger. How wild is the exchange rate for this new form of currency? In their November 2016 paper entitled “A Statistical Risk Assessment of Bitcoin and Its Extreme Tail Behaviour”, Joerg Osterrieder and Julian Lorenz… Keep Reading

Is the recent Fama-French augmentation of their classic three-factor (market, size, book-to-market) model of stock returns with profitability and investment factors a major advance? In their November 2016 paper entitled “Five Concerns with the Five-Factor Model”, David Blitz,  Matthias Hanauer, Milan Vidojevic and Pim van Vliet identify five concerns regarding the five-factor model. Based on empirical and theoretical (rationale)… Keep Reading

Does the term structure of crude oil futures predict stock market returns? In their October 2016 paper entitled “Do Oil Futures Prices Predict Stock Returns?”, I-Hsuan Chiang and Keener Hughen examine the ability of crude oil futures prices to predict U.S. stock market returns. They identify the first three principal components of the nearest six oil futures… Keep Reading

Is a passive investor one who holds all securities in their respective market capitalization weights, or one who never trades? In his October 2016 paper entitled “Sharpening the Arithmetic of Active Management”, Lasse Pedersen challenges the proposition that active trading is a zero sum game that produces an average gross return equal to that realized by passive investors…. Keep Reading

Do global equity funds generate alpha after accounting for both equity and currency factors? In their October 2016 paper entitled “Global Equity Fund Performance Evaluation with Equity and Currency Style Factors”, David Gallagher, Graham Harman, Camille Schmidt and Geoff Warren measure the performance of global equity funds based on their quarterly holdings after adjusting for market return, six widely… Keep Reading

How do moving averages work for timing asset prices, and how do different kinds of moving averages work differently? In his October 2016 paper entitled “Moving Averages for Market Timing”, Valeriy Zakamulin presents in three chapters: (1) financial series trend detection and turning point identification using moving averages; (2) the mathematics and properties of moving averages, with focus on… Keep Reading

Are commodity futures an attractive asset class over the long run? In their October 2016 paper entitled “Commodities for the Long Run”, Ari Levine, Yao Hua Ooi and Matthew Richardson analyze commodity futures prices extending as far back as 1877. Their perspective is that futures price reflects both foregone interest and cost of storage for holding a commodity, with these costs potentially… Keep Reading

Do short sellers who publicly attack their targets affect stock prices? How do they choose their targets? In his October 2016 paper entitled “Activist Short-Selling”, Wuyang Zhao studies short sellers who publish adverse research on and/or publicly disparage the stocks they short. To assess unique effects of the negative publicity on targeted stock prices, he compares performances of targeted… Keep Reading

Does a model based on factors extracted from investable exchange-traded funds (ETF) work as well in evaluating fund alphas as models based on factors from more conceptional portfolios? In their October 2016 paper entitled “Bringing Order to Chaos: Capturing Relevant Information with Hedge Fund Factor Models”, Yongjia Li and Alexey Malakhov examine a hedge fund performance evaluation model that identifies risk… Keep Reading