Investing Research Articles

When does value investing work and how does it work best? In the April 2015 initial draft of their paper entitled “Fact, Fiction, and Value Investing”, Clifford Asness, Andrea Frazzini, Ronen Israel and Tobias Moskowitz address areas of confusion about value investing. They describe value as the tendency of cheap securities to outperform expensive ones based on some valuation method. They broadly specify the value premium… Keep Reading

Do smart beta exchange-traded funds (ETF), which systematically tilt holdings to capture one or more factor premiums (such as size, value, momentum, quality, beta and volatility), offer net value to investors? In the April 2015 initial draft of his paper entitled “How Smart are ‘Smart Beta’ ETFs? Analysis of Relative Performance and Factor Timing”, Denys Glushkov assesses whether… Keep Reading

How sensitive is the performance of the “Simple Asset Class ETF Momentum Strategy” to selecting ranks other than winners and to choosing a momentum ranking interval other than five months? This strategy each month ranks the following eight asset class exchange-traded funds (ETF), plus cash, on past return and rotates to the strongest class: PowerShares DB Commodity Index Tracking (DBC)… Keep Reading

The order of the first and second place winners is now reversed from that shown at the close yesterday because of a price change on Yahoo!Finance after 4:00PM.

Do simple stock market valuation ratios work for tactical allocation? In his April 2015 paper entitled “Multiples, Forecasting, and Asset Allocation”, Javier Estrada investigates whether investors can outperform a 60-40 stocks-bonds benchmark portfolio via tactical strategies based on one of three simple stock market valuation ratios: (1) dividend-price ratio (D/P); (2) price-earnings ratio (P/E); or, (3) cyclically adjusted… Keep Reading

Do low-volatility strategies work for all stocks? In their April 2015 paper entitled “Low Risk Anomalies?”, Paul Schneider, Christian Wagner and Josef Zechner examine relationships between low-beta/low-volatility stock anomalies and implied stock return skewness. They compute ex-ante (implied) skewness for each stock via a portfolio of associated options that is long (short) out-of-the-money calls (puts). The more investors are… Keep Reading

What makes investors happy with investment returns? In the April 2015 version of their paper entitled “All’s Well That Ends Well? On the Importance of How Returns Are Achieved”, Daniel Grosshans and Stefan Zeisberger employ a series of surveys to investigate how investor satisfaction depends on investment price path. Their main survey asks participants to imagine that they bought three winner stocks (10%… Keep Reading

We’ve updated “What Works Best?” to incorporate some recent research summaries and adjust interpretation of the body of research.

Do multi-class mutual funds exhibit good asset class allocation timing? In their April 2015 paper entitled “Multi-Asset Class Mutual Funds: Can They Time the Market? Evidence from the US, UK and Canada”, Andrew Clare, Niall O’Sullivan, Meadhbh Sherman and Steve Thomas investigate whether mutual fund managers time allocations across asset classes skillfully. They focus on three asset classes: equities, government bonds and corporate… Keep Reading

Is the part of profitability based on cash flow more informative than the part based on accruals? In their March 2015 paper entitled “Accruals, Cash Flows, and Operating Profitability in the Cross Section of Stock Returns”, Ray Ball, Joseph Gerakos, Juhani Linnainmaa and Valeri Nikolaev investigate the power of the cash flow part of profitability to predict stock returns. They… Keep Reading