Investing Research Articles

How far can a fund manager squeeze turnover while still maintaining an effective low-volatility portfolio? In his June 2015 paper entitled “Low Turnover: a Virtue of Low Volatility”, Pim van Vliet investigates the lower limit of turnover for a low-volatility stock portfolio in two ways. First, he reviews 21 published analyses to relate turnover to volatility reduction while controlling for… Keep Reading

What is the best scheme over the long run for identifying U.S. stock market trends? In the May 2015 version of his paper entitled “Market Timing With a Robust Moving Average”, Valeriy Zakamulin isolates the most robust moving average weighting scheme for a U.S. stock market index based on monthly data. He tests 300 weighting schemes. For all schemes, test portfolios are… Keep Reading

“Simple Asset Class ETF Value Strategy” (SACEVS) tests a simple relative value strategy that each quarter allocates funds to one or more of the following three asset class exchange-traded funds (ETF), plus cash, based on degree of undervaluation of measures of the term risk, credit risk and equity risk premiums: 3-month Treasury bills (Cash)iShares 7-10 Year Treasury Bond (IEF)iShares… Keep Reading

…commodity futures in aggregate offer a long-term return comparable to that of stocks, with less downside risk and a substantial diversification benefit for a stock/bond portfolio.

What are the most pressing systematic weaknesses in financial research, and how should the investment community address them? In the May 2015 version of his article entitled “The Future of Empirical Finance”, Marcos Lopez de Prado identifies three major problems in empirical finance and proposes ways to mitigate them. Based on his experience and common sense arguments and references… Keep Reading

Are there intractable weaknesses of historical inference as a tool to predict the behaviors of financial markets? In the May 2015 draft of his article entitled “Beyond Backtesting: The Historical Evidence Trap”, Ulrich Hammerich briefly describes four weaknesses of backtesting more difficult to address than overfitting/snooping, neglect of trading frictions and data quality. He calls these weaknesses the technological trap, the market efficiency… Keep Reading

Is there strong evidence for price momentum within and across all major asset classes over the long run? In the May 2015 version of their paper entitled “215 Years of Global Multi-Asset Momentum: 1800-2014 (Equities, Sectors, Currencies, Bonds, Commodities and Stocks)”, Christopher Geczy and Mikhail Samonov examine the momentum effect for very long price histories within and across major asset class… Keep Reading

Can investors exploit stock repurchase and issuance activity to predict market reaction to the next firm earnings release? In the May 2015 version of their paper entitled “Are Earnings Predictable?”, Shahram Amini and Vijay Singal test whether firm executives take advantage of superior information to time repurchases (issuances) of stock just before unexpectedly good (bad) earnings… Keep Reading

Smart beta strategies weight stocks according to one or a few historically predictive factors such as value, size, momentum or volatility rather than market capitalization. What are the cautions for investing in smart beta funds? In their April 2015 paper entitled “Smart Beta: Too Good to be True?”, Bruce Jacobs and Kenneth Levy critique the belief that smart beta strategies… Keep Reading

Do factors that predict returns in U.S. stock data also work on global stock markets at the country level? In the May 2015 version of their paper entitled “Do Quantitative Country Selection Strategies Really Work?”, Adam Zaremba and Przemysław Konieczka test 16 country stock market selection strategies based on relative market value, size, momentum, quality and volatility…. Keep Reading