Investing Research Articles

Are there economic conditions that favor stock price momentum investing? In the May 2012 draft of their paper entitled “Momentum and Aggregate Default Risk”, Arvind Mahajan, Alex Petkevich and Ralitsa Petkova investigate the relationship between stock momentum portfolio returns and U.S. aggregate default risk. They measure the momentum effect as average monthly gross returns of overlapping hedge portfolios formed each… Keep Reading

Is drawdown control a practical investment policy? In their February 2012 paper entitled “Optimal Portfolio Strategy to Control Maximum Drawdown: The Case of Risk-based Active Management with Dynamic Asset Allocation” (the National Association of Active Investment Managers’ 2012 Wagner Award third place winner), George Yang and Liang Zhong examine maximum percentage drawdown target as a criterion for active portfolio… Keep Reading

Does momentum investing work when implemented via mutual fund alpha? In his February 2012 paper entitled “Short Term Alpha as a Predictor of Future Mutual Fund Performance” (the National Association of Active Investment Managers’ 2012 Wagner Award runner-up), Michael Hartmann examines a momentum-based approach for selecting outperforming equity mutual funds by investment style. He considers nine equity investment styles: Large Capitalization Growth,… Keep Reading

A subscriber asked: “Have you looked at combining sector and asset class momentum models? This strategy would add alternative asset classes plus cash to the nine sectors.” A combined strategy encompasses nine sector exchange-traded funds (ETF) defined by the Select Sector Standard & Poor’s Depository Receipts (SPDR) per “Simple Sector ETF Momentum Strategy” plus the eight… Keep Reading

A subscriber commented and asked: “You compare style ETF momentum to sector ETF momentum in ‘Doing Momentum with Style (ETFs)’. Can you mix style and sector ETFs to form a combined momentum strategy and compare it with the individual style and sector momentum strategies?” A combined strategy encompasses the nine sector exchange-traded funds (ETF) defined… Keep Reading

Does timing based on simple moving averages (SMA) work for U.S. Real Estate Investment Trust (REIT) indexes? If so, which moving average is best? In his March 2012 paper entitled “The Market Timing Power of Moving Averages: Evidence from US REIT Indexes”, Paskalis Glabadanidis tests the effectiveness of SMAs for timing ten value-weighted and ten similar equal-weighted U.S…. Keep Reading

Are there ways to enhance the currency carry trade (long currencies offering high interest rates and short those offering low rates)? In the May 2012 version of their paper entitled “Average Variance, Average Correlation and Currency Returns”, Gino Cenedese, Lucio Sarno and Ilias Tsiakas investigate the ability of components of the currency exchange market risk (variance of… Keep Reading

Which consensus forecast of U.S. economic indicators is best? How does the U.S. equity market react to consensus forecast errors? In their April 2012 paper entitled “Market Reaction to Information Shocks: Does the Bloomberg and Briefing.com Survey Matter?”, Linda Chen, George Jiang and Qin Wang investigate the accuracy of, and equity futures market reactions to, competing Bloomberg… Keep Reading

What works for value stock investors? In his April 2012 paper entitled “Value Investing: Investing for Grown Ups?”, Aswath Damodaran explores success factors for three distinct types of value investing: (1) mechanical screening for stocks with value characteristics such as low earnings multiple, high book-to-market ratio and high return on investment; (2) taking contrarian positions in… Keep Reading

How attractive can currency trading be after optimizing across several anomalies? In the November 2011 version of their paper entitled “Beyond the Carry Trade: Optimal Currency Portfolios”, Pedro Barroso and Pedro Santa-Clara examine the performance of utility-maximized currency strategies designed to exploit interest rate variables, momentum, long-term reversal, current account and real exchange rate during the… Keep Reading