Investing Research Articles

A subscriber suggested testing the diversification power of iPath DJ-UBS Copper ETN (JJC) as a distinct asset class. To check, we add JJC to the following mix of asset class proxies (the same used in “Simple Asset Class ETF Momentum Strategy”): PowerShares DB Commodity Index Tracking (DBC)iShares MSCI Emerging Markets Index (EEM)iShares MSCI EAFE Index (EFA)SPDR Gold Shares (GLD)iShares Russell 1000 Index (IWB)iShares… Keep Reading

Does adding a proxy for the least developed (frontier) equity markets to a diversified portfolio improve its performance? To check, we add Guggenheim Frontier Markets ETF (FRN) to the following mix of asset class proxies (the same used in “Simple Asset Class ETF Momentum Strategy”): PowerShares DB Commodity Index Tracking (DBC)iShares MSCI Emerging Markets Index (EEM)iShares MSCI EAFE Index (EFA)SPDR… Keep Reading

Market volatility tends to rise as returns fall. Does adding a proxy for intermediate-term U.S. equity market volatility to a diversified portfolio improve its performance? To check, we add iPath S&P 500 VIX Mid-Term Futures (VXZ) to the following mix of asset class proxies (the same used in “Simple Asset Class ETF Momentum Strategy”): PowerShares DB Commodity… Keep Reading

Market volatility tends to rise as returns fall. Does adding a proxy for short-term U.S. equity market volatility to a diversified portfolio improve its performance? To check, we add iPath S&P 500 VIX Short Term Futures (VXX) to the following mix of asset class proxies (the same used in “Simple Asset Class ETF Momentum Strategy”): PowerShares DB… Keep Reading

Can investors rely on commodities to protect against inflation? In their May 2013 paper entitled “Commodities as Inflation Protection”, Andrew Marks, George Crawford and Jim Kyung-Soo Liew examine the belief that commodities represent an intrinsic store of value that hedges against inflation. They use spot prices for commodities because these prices have long histories. They use… Keep Reading

Does adding fundamental firm quality metrics to refine stock sorts based on traditional value ratios, book-to-market ratio (B/M) and earnings-to-price ratio (E/P), improve portfolio performance? In his 2013 paper entitled “The Quality Dimension of Value Investing”, Robert Novy-Marx tests combination strategies to determine which commonly used quality measures most enhance the performance of value ratios. He… Keep Reading

Should investors regard any of the exchange-traded products (ETP) based on S&P 500 Index option-implied volatility (VIX) futures as long-term holdings? In the May 2013 draft of his paper entitled “Trading Volatility: At What Cost?”, Robert Whaley describes these ETPs and evaluates them as buy-and-hold investments. VIX ETPs are based on VIX futures indexes with daily rebalancing,… Keep Reading

How should investors think about alternative asset allocation strategies for risk management? In his May 2013 paper entitled “Advances in Portfolio Risk Control. Risk! Parity?”, Winfried Hallerbach offers a practitioner’s review of new and revived portfolio allocation strategies, including: Equal Weight, Maximum Diversification, Minimum Variance; Equal Risk Contribution (Risk Parity); Inverse Volatility; Maximum Sharpe Ratio;… Keep Reading

Are returns on real estate usefully predictable? In the June 2012 version of their book chapter entitled “Forecasting Real Estate Prices”, Eric Ghysels, Alberto Plazzi, Walter Torous and Rossen Valkanov examine the evidence of predictability in U.S. residential and commercial real estate markets. They review methodologies used in constructing widely used real estate price indexes…. Keep Reading

Does Google search activity anticipate stock market action? In their paper entitled “Quantifying Trading Behavior in Financial Markets Using Google Trends”, Tobias Preis, Helen Susannah Moat and Eugene Stanley analyze the power of changes in Google search intensity (term search volume relative to total Google search volume) for 98 terms to predict the behavior of… Keep Reading