Investing Research Articles

Can computer software extract exploitable sentiments about individual stocks as conveyed by news articles? In their June 2016 paper entitled “News Versus Sentiment: Predicting Stock Returns from News Stories”, Steven Heston and Nitish Sinha test whether firm news sentiment as interpreted by Thomson Reuters NewScope reliably predicts stock returns. Input data include article publication time, firm mentioned, headline, relevance to the firm, staleness and sentiment… Keep Reading

Should investors believe that the financial industry can offer low-cost, liquid funds that reliably mimic Commodity Trading Advisor (CTA) hedge funds? In their June 2016 paper entitled “Just a One Trick Pony? An Analysis of CTA Risk and Return”, Jason Foran, Mark Hutchinson, David McCarthy and John O’Brien identify and examine performances of CTA-like hedge funds across eight distinct categories… Keep Reading

Can systematic, contrarian sports betting usefully diversify conventional investments? In their June 2016 paper entitled “Sports Betting As a New Asset Class: Can a Sports Trader Beat Hedge Fund Managers from 2010-2016?”, Lovjit Thukral and Pedro Vergel investigate whether a specific sports betting strategy outperforms and diversifies the Credit Suisse Hedge Fund Index and the S&P 500 Index. The strategy hypothesizes… Keep Reading

Do volume spikes in specific equity options signal abnormal returns for underlying stocks? In his June 2016 paper entitled “Investor Attention Strategy”, Xuewu Wang examines the motivation, construction and profitability of a strategy that selects stocks based on sudden attention to associated options. He defines sudden attention as volume spikes of at least 10 contracts after a week… Keep Reading

Matt Hall, cofounder and president of Hill Investment Group, introduces his 2016 book, Odds On: The Making of an Evidence-Based Investor, by stating that: “…the evidence-based movement has been studying market data and academic research to identify the groups of stocks and other investments that provide better odds of long-term success. …I’m inviting you to learn how evidence-based… Keep Reading

Does availability of liquid tracking products change short-term trending/reversal tendencies of equity indexes? In their May 2016 paper entitled “Indexing and Stock Market Serial Dependence Around the World”, Guido Baltussen, Sjoerd van Bekkum and Zhi Da investigate how introduction of index futures, exchange-traded funds (ETF) and mutual funds affects measures of index serial dependence. They hypothesize that technical interplay in… Keep Reading

Do data-intensive, high-frequency investor sentiment measurements usefully predict stock index performance? In his May 2016 paper entitled “Can Sentiment Indicators Signal Market Reversals?”, Arnaud Lagarde applies a random forest machine learning algorithm to test the power of Amareos sentiment indications to predict stock index reversals. Algorithm training data relates sentiment to known stock index return for the next 182 days (six… Keep Reading

When does a cointegration test, which looks for a connection between two apparently wandering price paths, work for pairs trading? In their May 2016 paper entitled “Cointegration and Relative Value Arbitrage”, Binh Do and Robert Faff investigate the conditions under which cointegration successfully identifies stocks for pairs trading. Their basic pairs trading strategy is to each month: Identify cointegrated pairs… Keep Reading

Do asset returns exhibit cyclic relative strength? In the December 2015 revision of their paper entitled “Return Seasonalities”, Matti Keloharju, Juhani Linnainmaa and Peter Nyberg examine 12-month relative strength cycles via a strategy that is each month long (short) assets with the highest (lowest) returns during the same calendar month over the past 20 years. They apply this strategy to individual… Keep Reading

Are prominent stock market bloggers in aggregate able to predict the market’s direction? The Ticker Sense Blogger Sentiment Poll “is a survey of the web’s most prominent investment bloggers, asking ‘What is your outlook on the U.S. stock market for the next 30 days?’” (bullish, bearish or neutral) on a weekly basis. The site currently… Keep Reading