Investing Research Articles

What are the parameters of profitable stock pairs trading in European equity markets? In their June 2011 paper entitled “European Equity Pairs Trading: The Effect of Data Frequency on Risk and Return”, Michael Lucey and Don Walshe examine the effects of both price measurement frequency (daily, weekly or monthly) and magnitude of pair price divergence… Keep Reading

Are commodities effective diversifiers for stocks and bonds? In his September 2012 paper entitled “Commodity Investments: The Missing Piece of the Portfolio Puzzle?”, Xiaowei Kang examines the diversification properties of commodity indexes relative to stock and bond indexes. He focuses on the widely used S&P GSCI, composed of 24 commodities with liquid futures markets weighted by… Keep Reading

Are managed futures programs good portfolio diversifiers? In his September 2012 paper entitled “Revisiting Kat’s Managed Futures and Hedge Funds: A Match Made in Heaven”, Thomas Rollinger updates prior research exploring the diversification effects of adding managed futures to traditional portfolios of stocks and bonds and to portfolios including stocks, bonds and hedge funds. His proxies… Keep Reading

Does a low-beta strategy work for mutual funds? In his September 2012 paper entitled “Capitalizing on the Greatest Anomaly in Finance with Mutual Funds”, David Nanigian examines portfolios of funds sorted on lagged beta to determine whether mutual fund investors can capitalize on outperformance of low-beta assets. He calculates rolling betas for each mutual fund based… Keep Reading

Does the S&P 500 options-implied volatility index (VIX) exhibit predictable daily, overnight and intraday tendencies? In their September 2012 paper entitled “What Makes the VIX Tick?”, Warren Bailey, Lin Zheng and Yinggang Zhou employ high-frequency data to investigate patterns in VIX behavior and measure relationships between VIX and various financial fundamentals, economic announcements and investor… Keep Reading

In an August 2004 article entitled “Time is Right for These 7 Biotechs” (apparently no longer available on MSN Money), Jim Jubak states: “…in most years, biotechs decline in the spring as investors anticipate a summer hiatus in the conferences where new clinical results are announced. They rally in the fall as the conference schedule… Keep Reading

The authors of the study summarized in “Exploit ETN Deviation from Indicative Value?” argue that deviations of prices for exchange-traded notes (ETN) from their indicative (immediate redemption) values may be useful as trading signals. How well does this mispricing concept work for the very liquid iPath S&P 500 VIX Short-term Futures ETN (VXX)? To check, we consider several… Keep Reading

Issuers of exchange-traded notes (ETN) publish daily indicative (immediate redemption) values for these debt instruments. Does deviation of the market price of an ETN from its indicative value represent an exploitable mispricing? In their September 2012 paper entitled “Mispricing and Trading Profits in ETNs”, Dean Diavatopoulos, Helyette Geman, Lovjit Thukral and Colby Wright investigate the gross… Keep Reading

In mid-2008, a reader speculated and asked: “You have probably heard of the historical 6:1 crude oil/natural gas price ratio. This relationship is said to be mean reverting based on the thermal equivalence of the two commodities. Does this ratio have any predictive power for the future prices of oil or natural gas? If there… Keep Reading

Are there certain kinds of insider trades that are more exploitable than others? In their August 2012 paper entitled “Insider Trading Patterns”, David Cicero and Babajide Wintoki define and examine two kinds of insider trading: (1) isolated trades (no trades in prior or subsequent months; and, (2) sequenced trades (occurring in successive months). They hypothesize that… Keep Reading