Investing Research Articles

Under what conditions is periodic rebalancing a successful “volatility harvesting” strategy? In his February 2014 paper entitled “Disentangling Rebalancing Return”, Winfried Hallerbach analyzes the return from periodic portfolio rebalancing by decomposing its effects into a volatility return and a dispersion discount. He defines: Rebalancing return as the difference in (geometric) growth rates between periodically rebalanced… Keep Reading

Has easy access to commodity allocations via exchange-traded instruments (financialization) changed the way commodity prices interact with the economy? In his February 2014 paper entitled “Macroeconomic Determinants of Commodity Returns in Financialized Markets”, Adam Zaremba investigates relationships between commodity returns and economic conditions in pre-financialization (before 2004) and post-financialization (2004 and after) environments. He defines… Keep Reading

Does the cost of borrowing shares of a stock for shorting predict its future returns? In their January 2014 paper entitled “The Shorting Premium and Asset Pricing Anomalies”, Itamar Drechsler and Qingyi (Freda) Drechsler investigate shorting fees as a predictor of stock returns. For analysis, they sort stocks at the end of each month into… Keep Reading

What drives the performance of risk parity asset allocation, and on what asset classes does it therefore work best? In their January 2014 paper entitled “Inter-Temporal Risk Parity: A Constant Volatility Framework for Equities and Other Asset Classes”, Romain Perchet, Raul Leote de Carvalho, Thomas Heckel and Pierre Moulin employ simulations and backtests to explore the… Keep Reading

Is it possible to predict serial correlation (autocorrelation) of stock returns, and thereby enhance reversal and momentum strategies. In the January 2014 version of his paper entitled “The Information Content of Option Prices Regarding Future Stock Return Serial Correlation”, Scott Murray investigates the relationship between the variance ratio (the ratio of realized to implied stock return… Keep Reading

Are gold price movements predictable? In his December 2013 paper entitled “Gold. The Bursting of a Bubble?”, Tim Verheyden assesses gold price predictability in two ways. First, he applies an autoregressive integrated moving average (ARIMA) model to assess the value of gold price technical analysis (whether past price behavior predicts future price behavior). Second, he examines interaction of… Keep Reading

What individual investment behaviors are worst? In their January 2014 paper entitled “Which Investment Behaviors Really Matter for Individual Investors?”, Joachim Weber, Steffen Meyer, Benjamin Loos and Andreas Hackethal investigate relationships between the following ten tendencies of individual investors and portfolio performance: Portfolio turnover: unprogrammed trading volume scaled by portfolio value. Trade clustering: clustering of investor… Keep Reading

Is the level of uncertainty among equity investors, as measured by the dispersion of S&P 500 Index option volume across strike prices, a useful predictor of stock market direction? In their January 2014 paper entitled “Stock Market Ambiguity and the Equity Premium”, Panayiotis Andreou, Anastasios Kagkadis, Paulo Maio and Dennis Philip investigate the ability of… Keep Reading

What factors truly explain movements in the price of gold? In his January 2014 paper entitled “Facts and Fantasies about Gold”, Joachim Klement checks the validity of common explanations for changes in gold price. Specifically, he investigates whether gold price responds to: change in inflation expectation; change in real interest rate; financial crises; changes in currency… Keep Reading

Can investors quickly exploit surprising after-hours firm earnings/revenue announcements by trading after hours? In the January 2014 version of his paper entitled “Slow Price Adjustment to Public News in After-Hours Trading”, Jiasun Li investigates after-hours (4:00 pm to 8:00 pm) responses of stock prices to surprising after-hours quarterly earnings announcements. He defines a positive (negative) surprise as neither revenue nor… Keep Reading