Investing Research Articles

Which equity factors truly explain stock returns, and what group of them constitute the best model? In their November 2019 paper entitled “Bayesian Solutions for the Factor Zoo: We Just Ran Two Quadrillion Models”, Svetlana Bryzgalova, Jiantao Huang and Christian Julliard present a Bayesian estimation and model selection method for pricing of stock portfolios that… Keep Reading

What is the best way to balance crash protection and false alarms for intrinsic, also called absolute or time series, momentum strategies that are long (short) an asset when its return over a specified past interval is positive (negative)? In their November 2019 paper entitled “Momentum Turning Points”, Ashish Garg, Christian Goulding, Campbell Harvey and… Keep Reading

Below is a weekly summary of our research findings for 12/16/19 through 12/20/19. These summaries give you a quick snapshot of our content the past week so that you can quickly decide what’s relevant to your investing needs. Subscribers: To receive these weekly digests via email, click here to sign up for our mailing list.

Is retail trading a reliable driver of U.S. stock momentum? In his November 2019 paper entitled “Retail Trading and Momentum Profitability”, Douglas Chung investigates interactions across stocks between current proportion of retail trading and future momentum returns. Specifically, for each month and for each of two recent stock samples, he: Sorts stocks into fifths (quintiles)… Keep Reading

Do both the long and short sides of portfolios used to quantify widely accepted equity factors benefit investors? In their November 2019 paper entitled “When Equity Factors Drop Their Shorts”, David Blitz, Guido Baltussen and Pim van Vliet decompose and analyze gross performances of long and short sides of U.S. value, momentum, profitability, investment and… Keep Reading

Below is a weekly summary of our research findings for 12/9/19 through 12/13/19. These summaries give you a quick snapshot of our content the past week so that you can quickly decide what’s relevant to your investing needs. Subscribers: To receive these weekly digests via email, click here to sign up for our mailing list.

Do differences in expectations between institutional and individual investors in stocks and bonds, as quantified in weekly legacy Commitments of Traders (COT) reports, offer exploitable timing signals? In the February 2019 revision of his paper entitled “Want Smart Beta? Follow the Smart Money: Market and Factor Timing Using Relative Sentiment”, flagged by a subscriber, Raymond… Keep Reading

What does it mean when the number of stock funds exceeds the number of stocks they hold? In their October 2019 paper entitled “What Happens with More Funds than Stocks?”, Ananth Madhavan, Aleksander Sobczyk and Andrew Ang tackle this question by examining holdings over time for all U.S. active equity mutual funds and equity exchange-traded… Keep Reading

A subscriber proposed an alternative to the strategy tested in “Using P/E10 Thresholds to Time the U.S. Stock Market”, which rebalances a stocks-bonds portfolio based on Shiller cyclically adjusted price-to-earnings ratio (P/E10 or CAPE) thresholds, as follows: If P/E10 > 22, hold 40% stocks and 60% bonds. If 14 < P/E10 < 22, hold 60%… Keep Reading

Are Bollinger Bands (BB) useful for deciding when to buy low and when to sell high the overall U.S. stock market? In other words, can an investor beat a buy-and-hold strategy by systematically buying (selling) when the market crosses below (above) the lower (upper) BB? To check, we examine the historical behavior of BBs around… Keep Reading