Investing Research Articles

Does purifying stock return rankings of any dependence on Fama-French three-factor model risk factors enhance momentum strategy performance? In an update of their August 2009 paper entitled “Residual Momentum”, David Blitz, Joop Huij and Martin Martens suppress exposures of a conventional stock momentum strategy to market, size and book-to-market ratio risk factors by ranking stocks on residual returns… Keep Reading

Are collectibles good long-term investments? In their September 2013 paper entitled “The Investment Performance of Emotional Assets”, Elroy Dimson and Christophe Spaenjers estimate long-term returns for selected collectibles and review the risks associated with such investments. They focus on art, stamps and violins, and also consider wine and diamonds. Using repeat sales histories and catalog prices for… Keep Reading

Does combining past return rankings at long (multi-year) and short (3-12 months) intervals offer a means of boosting momentum strategy returns? In their August 2013 paper entitled “Price Momentum Components: Evidence from International Market Indices”, Graham Bornholt and Mirela Malin compare strategies based on the interplay of short-term continuation and long-term reversal as applied to… Keep Reading

The following table summarizes ranking of asset classes by subscribers responding during August 2013 to the following question (via the home page poll): “Which of the following asset classes do you expect to perform best in September 2013?” For comparison, the table also shows ranking of asset classes by momentum as specified in the baseline Momentum Strategy.

Can traders exploit the essential price-moving sentiment expressed in news articles about stocks? In their August 2013 paper entitled “News versus Sentiment: Comparing Textual Processing Approaches for Predicting Stock Returns”, Steven Heston and Nitish Sinha compare the abilities of two different word sentiment dictionaries and a sophisticated neural network to predict stock returns by analyzing… Keep Reading

We are continuing to test interest in a poll regarding which of nine asset classes will perform best during the next calendar month (September 2013). The poll is in the right-hand column on the CXOadvisory.com home page below the “CURRENT MOMENTUM WINNERS” box. Participation and results are open only to CXOadvisory.com subscribers. Our assumption (based on… Keep Reading

Research on hedge fund performance derives from voluntary reports by hedge funds to commercial databases. This environment encourages: (1) backfill bias (non-reporting funds doing well are most likely to begin reporting, including historical data that arguably involves some good luck); and, (2) delisting bias (reporting funds doing poorly, arguably due in part to poor strategies,… Keep Reading

Do investors reliably reallocate between equities and cash in response to changes in government monetary stance? In their July 2013 paper entitled “Asset Allocation and Monetary Policy: Evidence from the Eurozone”, Harald Hau and Sandy Lai apply regressions to examine how variations in the tightness of monetary policy (real short-term interest rates) affect investor allocations… Keep Reading

Does the Halloween effect (sell in May) still hold? In the June 2013 version of their paper entitled “Are Stock Markets Really so Inefficient? The Case of the ‘Halloween Indicator’”, Hubert Dichtl and Wolfgang Drobetz investigate whether true out-of-sample results confirm that the Halloween effect persists for five total return indexes: S&P 500, DAX 30,… Keep Reading

The guiding belief of the Fed Model of stock market valuation is that investors use a Treasury note (T-note) yield as a benchmark for the expected (forward) earnings yield of the stock market. When the gap between the forward earnings yield and the T-note yield is positive (negative), stocks are relatively attractive (unattractive), and investors… Keep Reading