Investing Research Articles

Does the set of variables that have the strongest correlations with subsequent U.S. stock market returns over the prior decade usefully predict market returns out-of-sample? In the July 2015 draft of their paper entitled “A Practitioner’s Defense of Return Predictability”, Blair Hull and Xiao Qiao apply this correlation screening approach to a set of 20 published stock market forecasting variables encompassing… Keep Reading

Where is the price of gold headed? In their August 2015 paper entitled “The Golden Constant”, Claude Erb and Campbell Harvey apply a “golden constant” hypothesis (inflation is the principal driver of the price of gold) to project the future price of gold. Specifically, they explore implications of mean reversion of the real price of gold. Using the monthly… Keep Reading

Is there an easy way to avoid unfavorable positions within a currency carry trade strategy (long currencies with high interest rates and short those with low)? In their July 2015 paper entitled “Conditioning Carry Trades: Less Risk, More Return!”, Arjen Mulder and Ben Tims examine a carry trade strategy that avoids currencies for which exchange rate return is likely to offset interest rate… Keep Reading

What does a large online repository of research on financial markets say about community interactions? In the August 2015 version of his article entitled “Recent Trends in Empirical Finance”, Marcos Lopez de Prado measures trends in level of research activity, topical emphasis, level of interest as measured by downloads and level of collaboration. Based on data for 128,897 research… Keep Reading

What is the state of the hedge fund industry? In the July 2015 draft of their paper entitled “Hedge Funds: A Dynamic Industry In Transition”, Mila Getmansky, Peter Lee and Andrew Lo review recent academic research on hedge funds and update industry performance statistics. They surmise that  hedge fund data from 10 years ago may be unrepresentative of today’s… Keep Reading

Does firm news reliably interact with stock return anomalies? In their July 2015 paper entitled “Anomalies and News”, Joseph Engelberg, David McLean and Jeffrey Pontiff compare anomaly returns on days with and without firm-specific news releases. They consider 97 anomalies published in 80 academic papers. For some analyses, they segregate these anomalies into four categories: (1) firm event-related (such as stock… Keep Reading

Are currency carry and momentum strategies complementary? If so, why? In their July 2015 paper entitled “Carry and Trend Following Returns in the Foreign Exchange Market”, Andrew Clare, James Seaton, Peter Smith and Steve Thomas examine how market liquidity affects returns to currency carry and trend following strategies and test the benefits of combining these two strategies. They measure carry strategy returns… Keep Reading

Can investors refine and exploit the upward bias of overnight stock returns? In the July 2015 version of her paper entitled “Night Trading: Lower Risk but Higher Returns?”, Marie-Eve Lachance presents a way of sorting stocks by strength of overnight return bias and investigates gross and net profitability of associated overnight-only investment strategies. Specifically, she each month regresses daily… Keep Reading

Should investors adopt a mutual fund for the long term, or should they occasionally switch to funds with fresh ideas and energy? In the July 2015 draft of their paper entitled “Milk or Wine: Mutual Funds’ (Dis)economies of Life”, Laura Dahm and Christoph Sorhage investigate whether mutual fund performance tends to decline or improve with age. They… Keep Reading

Does the ratio of aggregate U.S. stock market valuation (MV) to U.S. Gross National Product (GNP) or Gross Domestic Product (GDP), the approximate value of goods and services produced by U.S. companies, reliably indicate stock market overvaluation? In their July 2015 paper entitled “Can Warren Buffett Also Predict Equity Market Downturns?”, Sebastien Lleo and William Ziemba investigate… Keep Reading