Investing Research Articles

Is there an objective way to benchmark the performance of trend-following Managed Futures hedge funds? In their March 2016 paper entitled “Adaptive Time Series Momentum – Benchmark for Trend-Following Funds”, Peter Erdos and Gert Elaut test a futures timing system that increases (decreases) allocations when trends are emerging (fading) per 251 equally weighted, volatility-scaled, daily rebalanced time series momentum (TSMOM) strategies. Strategy lookback… Keep Reading

Do smart beta indexes efficiently exploit factor premiums? In his April 2016 paper entitled “Factor Investing with Smart Beta Indices”, David Blitz investigates how well smart beta indexes, which deviate from the capitalization-weighted market per mechanical rules, capture corresponding factor portfolios. He consider five factors: value, momentum, low-volatility, profitability and investment. He measures their practically exploitable premiums via returns on long-only… Keep Reading

How should investors think about stock factor investing? In his April 2016 paper entitled “The Siren Song of Factor Timing”, Clifford Asness summarizes his current beliefs on exploiting stock factor premiums. He defines factors as ways to select individual stocks based on such firm/stock variables as market capitalization, value (in many flavors), momentum, carry (yield) and quality. He… Keep Reading

Can individual investors practically implement mean-variance optimization in a multi-asset class context? In their April 2016 paper entitled “Asset Allocation: A Recommendation for Resolving the Collision between Theory and Practice”, Larry Prather, James McCown and Ron Shaw describe how individual investors can construct and maintain a low-cost optimal (maximum Sharpe ratio) multi-class portfolio via the Excel Solver function. They consider… Keep Reading

Is there a most practical way to make value and momentum work together across stocks? In the April 2016 version of their paper entitled “Combining Value and Momentum”, Gregg Fisher,  Ronnie Shah and Sheridan Titman examine long-only stock portfolios that seek exposure to both value and momentum while suppressing trading frictions. They define value as high book-to-market ratio based… Keep Reading

How well does technical trading work for spot currency exchange rates? In their April 2016 paper entitled “Technical Trading: Is it Still Beating the Foreign Exchange Market?”, Po-Hsuan Hsu, Mark Taylor and Zigan Wang test the effectiveness of a broad set of quantitative technical trading rules as applied to exchange rates of 30 currencies with the U.S. dollar… Keep Reading

Can investors exploit economic data for monthly stock market timing? In their September 2015 paper entitled “Getting the Most Out of Macroeconomic Information for Predicting Excess Stock Returns”, Cem Cakmaklı and Dick van Dijk test whether a model employing 118 economic variables improves prediction of monthly U.S. stock market (S&P 500 Index) excess returns based on conventional valuation ratios (dividend yield… Keep Reading

Does a surge in patent activity predict a surge in, or creative destruction of, equity value? To explore this question, assuming patent applications need not be approved to be exploited, we examine relationships between the growth rates of U.S. patent applications/patents as simple measures of innovation and U.S. stock market returns. Using U.S. patent activity (numbers of… Keep Reading

Do commodity price changes predict currency exchange rate fluctuations for commodity-exporting countries? In their March 2016 paper entitled “When the Walk is Not Random: Commodity Prices and Exchange Rates”, Emanuel Kohlscheen, Fernando Avalos  and Andreas Schrimpf analyze relationships between commodity prices and exporter exchange rates. They first construct daily commodity export price indexes tailored to 11 commodity-exporting countries (Australia, Brazil, Canada,… Keep Reading

Does adding crash protection based on global market breadth enhance the reliability of dual momentum? In their April 2016 paper entitled “Protective Asset Allocation (PAA): A Simple Momentum-Based Alternative for Term Deposits”, Wouter Keller and Jan Willem Keuning examine a multi-class, dual-momentum portfolio allocation strategy with crash protection based on multi-market breadth. Their principal goal is consistently positive returns,… Keep Reading