Investing Research Articles

Should investors pursue initial coin offerings (ICO), special-purpose crypto-tokens? In their May 2018 paper entitled “Digital Tulips? Returns to Investors in Initial Coin Offerings”, Hugo Benedetti and Leonard Kostovetsky study the market for crypto-tokens, focusing on: initial pricing; returns from buying at ICO and selling at date of listing on an exchange; and, returns from buying at listing date… Keep Reading

Which factor models of stock returns are currently best? In their June 2018 paper entitled “q5“,  Kewei Hou, Haitao Mo, Chen Xue and Lu Zhang, introduce the q5 model of stock returns, which adds a fifth factor (expected growth) to the previously developed q-factor model (market, size, asset growth, return on equity). They measure expected growth as 1-year, 2-year and… Keep Reading

Do currency exchange factor strategies usefully diversify a set of conventional asset classes? In their May 2018 paper entitled “Currency Management with Style”, Harald Lohre and Martin Kolrep investigate the systematic harvesting of currency exchange carry, value and momentum strategies, specified as follows and applied to the G10 currencies: Carry – buy (sell) the three equally weighted… Keep Reading

“Is There Really an Size Effect?” summarizes research challenging the materiality of the equity size effect. Is there a counter? In their June 2018 paper entitled “It Has Been Very Easy to Beat the S&P500 in 2000-2018. Several Examples”, Pablo Fernandez and Pablo Acin double down on the size effect via a combination of market capitalization thresholds… Keep Reading

Does separating the active (alpha) and passive (market exposure, or beta) components of an overall equity investment strategy, thereby isolating turnover, reduce overall tax burden? In their May 2018 paper entitled “The Tax Benefits of Separating Alpha from Beta”, Joseph Liberman, Clemens Sialm, Nathan Sosner and Lixin Wang investigate the tax implications of separating alpha from beta for… Keep Reading

Do changes in firm financial reporting practices signal bad news to come? In the February 2018 update of their paper entitled “Lazy Prices”, Lauren Cohen, Christopher Malloy and Quoc Nguyen investigate relationships between changes in firm financial reporting practices (SEC 10-K, 10-K405, 10-KSB and 10-Q filings) and future firm/stock performance. They focus on quarter-to-quarter changes in content bases on… Keep Reading

Do small market capitalization stocks really outperform big ones, as strongly implied by the prominence of the size effect in published research and factor models? In their May 2018 paper entitled “Fact, Fiction, and the Size Effect”, Ron Alquist, Ronen Israel and Tobias Moskowitz survey the body of research on the size effect and employ simple tests to… Keep Reading

How well do different measures of stock quality perform as portfolio screens? In the May 2018 update of paper entitled “Does Earnings Growth Drive the Quality Premium?”, Georgi Kyosev, Matthias Hanauer, Joop Huij and Simon Lansdorp review commonly used quality definitions, test their respective powers to predict stock returns and analyze usefulness in constructing international stocks… Keep Reading

Do firms with predictable sales seasonality continually “surprise” investors with good high season (bad low season) sales and thereby have predictable stock return patterns? In their May 2018 paper entitled “When Low Beats High: Riding the Sales Seasonality Premium”, Gustavo Grullon, Yamil Kaba and Alexander Nuñez investigate firm sales seasonality as a stock return predictor. Specifically, for each… Keep Reading

Does volatility targeting improve Sharpe ratios and provide crash protection across asset classes? In their May 2018 paper entitled “Working Your Tail Off: The Impact of Volatility Targeting”, Campbell Harvey, Edward Hoyle, Russell Korgaonkar, Sandy Rattray, Matthew Sargaison, and Otto Van Hemert examine return and risk effects of long-only volatility targeting, which scales asset and/or portfolio exposure higher (lower) when… Keep Reading