Investing Research Articles

Mebane Faber states in the first chapter of his 2016 book Invest with the House: Hacking the Top Hedge Funds: “We make two assumptions…: 1. There are active managers that can beat the market… 2. Superior active managers can be identified. …There is a general feeling that the market can’t be beat, and it is tough to get past that belief. A big… Keep Reading

Who are the givers and who are the takers among mutual funds and hedge funds? In their January 2016 paper entitled “Style and Skill: Hedge Funds, Mutual Funds, and Momentum”, Mark Grinblatt, Gergana Jostova, Lubomir Petrasek and Alexander Philipov analyze quarter-to-quarter changes in Form 13F stock holdings to assess investment styles and sources of performance for hedge funds… Keep Reading

Does seasonality usefully combine with trend following for timing asset markets? In his January 2016 paper entitled “Multi-Asset Seasonality and Trend-Following Strategies”, Nick Baltas examines seasonal patterns (based on same calendar month over the past ten years) for four asset classes: commodities, government bonds, currency exchange rates and country equity markets. He then tests whether identified seasonal patterns enhance a simple… Keep Reading

Wesley Gray, Jack Vogel and David Foulke preface their 2015 book, DIY Financial Advisor: A Simple Solution to Build and Protect Your Wealth, by stating that: “This book is a synopsis of our research findings developed while serving as a consultant and asset manager for large family offices. …Our book is meant to be an educational journey that slowly builds… Keep Reading

Do U.S. stock return anomalies exhibit exploitable momentum? In their December 2016 paper entitled “Scaling Up Market Anomalies”, Doron Avramov, Si Cheng, Amnon Schreiber and Koby Shemer test momentum across stock return anomalies. Their investment universe consists of the long and short sides of 15 stock portfolios, each long (short) the top (bottom) tenth of stocks based on sorting by one of… Keep Reading

How sensitive is the performance of the “Simple Sector ETF Momentum Strategy” to selecting ranks other than winners and to choosing a momentum ranking interval other than six months? This strategy each month ranks the following nine sector exchange-traded funds (ETF) on past return and rotates to the strongest sector: Materials Select Sector SPDR (XLB) Energy Select Sector… Keep Reading

Do simple momentum trading strategies applied to major U.S. stock market sectors outperform reasonable benchmarks? To investigate, we apply three simple momentum strategies to the nine sector exchange-traded funds (ETF) defined by the Select Sector Standard & Poor’s Depository Receipts (SPDR): Materials Select Sector SPDR (XLB) Energy Select Sector SPDR (XLE) Financial Select Sector SPDR… Keep Reading

Is selling market index call options to finance, at least partly, buying crash protection in the form of put options a shrewd tactic? In their December 2016 paper entitled “Risk and Return of Equity Index Collars”, Roni Israelov and Matthew Klein investigate the performance of such equity index collars by decomposing their returns into equity risk premium and volatility… Keep Reading

What are the moving parts of an equity index covered call strategy, and what can investors do to enhance its performance? In the October 2015 update of their paper entitled “Covered Calls Uncovered”, Roni Israelov and Lars Nielsen decompose equity index covered call strategy returns into three risk premiums: (1) long equity; (2) short equity volatility; and, (3) long… Keep Reading

Are exchange-traded funds (ETF) efficient from a trading frictions perspective? In the October 2015 version of their paper entitled “ETF Liquidity”, Ben Marshall, Nhut Nguyen and Nuttawat Visaltanachoti examine magnitude of trading frictions, best liquidity metric, time-variation in liquidity time and liquidity-return relationship across a large number of ETFs. Their universe consists of 870 ETFs: 571 equity (411 U.S. and 160 international),… Keep Reading