Investing Research Articles

Should investors diversify U.S. equity holdings with S&P 500 volatility index (VIX) futures or exchange-traded notes (ETN) constructed from these futures? In the March 2012 version of their paper entitled “Diversification of Equity with VIX Futures: Personal Views and Skewness Preference”, Carol Alexander and Dimitris Korovilas examine the performance and equity diversification power of VIX futures…. Keep Reading

Do “new” momentum stocks outperform “old” ones? In the March 2012 version of their paper entitled “Limited Attention, Salience, and Stock Returns” [apparently removed from SSRN, casting doubt on findings], Avanidhar Subrahmanyam, Jason Wei and Hsin-Yi Yu analyze whether stocks newly entering and exiting extreme momentum deciles exhibit unusual future returns because of heightened investor attention. Their benchmark (6-6) strategy… Keep Reading

In general, when the U.S. stock market goes down, the S&P 500 volatility index (VIX) goes up. VIX is not investable, but VIX futures are available. Are short-term VIX futures a good way to hedge equity market declines and guard against market blow-ups? To investigate we focus on returns from holding the contract nearest to… Keep Reading

Is individual investing truly a tale of woeful mistakes and biases? In their March 2012 paper entitled “No Skill, Mere Luck? – An Analysis of Individual Investors’ Investment Performance”, Andreas Hackethal, Steffen Meyer, Dennis Schmoltzi and Christian Stammschulte apply bootstrapping simulations based on actual portfolios to distinguish skill from luck among a sample of individual German investors…. Keep Reading

It is arguable that many exchange-traded fund (ETF) momentum strategy tests derive more from logical/programming simplicity than common portfolio management practices. Does momentum work for portfolios of ETFs when melded with the latter? In his March 2012 paper entitled “Tactical Asset Allocation Using Relative Strength”, John Lewis tests ETF momentum in the context of real-world… Keep Reading

Are there market conditions most conducive to stock pairs trading? In their March 2012 paper entitled “Losing Sight of the Trees for the Forest? Pairs Trading and Attention Shifts”, Heiko Jacobs and Martin Weber assess how big-picture turbulence relates to profitability of stock pairs trading, hypothesizing that big-picture distractions draw attention away from specific opportunities. Their… Keep Reading

Does political drama take over as the principal driver of U.S. stock market implied volatility during election seasons? In their March 2012 paper entitled “U.S. Presidential Elections and Implied Volatility: The Role of Political Uncertainty”, John Goodell and Sami Vähämaa compare the effects of political uncertainty to those of eight other sources of uncertainty on implied stock market… Keep Reading

Are there economic and financial variables that meaningfully predict return volatilities of financial markets? In their March 2012 paper entitled “A Comprehensive Look at Financial Volatility Prediction by Economic Variables”, Charlotte Christiansen, Maik Schmeling and Andreas Schrimpf investigate the ability of 38 economic and financial variables to predict return volatilities of four asset classes (stocks, foreign… Keep Reading

Can investors reliably exploit monetary expansion and contraction as signaled by decreases and increases in the Federal Funds Rate (FFR)? In the December 2011 version of his paper entitled “Don’t Fight the Fed!”, Paulo Maio investigates the predictive power of FFR for the equity risk premium and the profitability of trading strategies based on this… Keep Reading

Do strategy-based commodity indexes introduced in recent years offer value to investors? In the February 2012 version of their paper entitled “Strategic and Tactical Roles of Enhanced Commodity Indices”, Georgios Rallis, Joelle Miffre and Ana-Maria Fuertes compare the returns and risks of enhanced long-only commodity indexes that exploit signals based on the time-to-maturity, momentum and term… Keep Reading