October 3, 2011 - Calendar Effects
Does the U.S. stock market exhibit predictable return and volatility patterns during the trading day? To investigate, we analyze one-minute prices for SPDR S&P 500 (SPY) over two recent years. Specifically, we calculate average cumulative return, average returns for 15-minute intervals and average standard deviation of one-minute returns during 15-minute intervals over the trading day during… Keep Reading
September 30, 2011 - Momentum Investing
Has the stock market adapted to widespread investor efforts to exploit intermediate-term return momentum? In their paper entitled “Momentum Loses Its Momentum: The Implication on Market Efficiency”, Debarati Bhattacharya, Raman Kumar and Gokhan Sonaer evaluate the robustness of momentum returns in the U.S. stock market over time via consideration of three subperiods: 1965-1989 (SP1), 1990-1998… Keep Reading
September 29, 2011 - Individual Investing
Do distinct neural processes for rewards and punishments result in distinct variation in learning about financial gains and financial losses? If so, is such variation material to wealth-building? In their September 2011 paper entitled “Gain and Loss Learning Differentially Contribute to Life Financial Outcomes”, Brian Knutson, Gregory Samanez-Larkin and Camelia Kuhnen examine whether individual differences in… Keep Reading
September 28, 2011 - Sentiment Indicators
Does news lead the stock market? In his September 2011 paper entitled “Reuters Sentiment and Stock Returns”, Matthias Uhl tests whether aggregate Thomson Reuters news sentiment (feeling, opinion or emotion evoked while reading a Reuters news article) predicts stock market returns at a monthly frequency. He aggregates monthly sentiment by summing individual articles coded as evoking positive… Keep Reading
September 27, 2011 - Animal Spirits, Fundamental Valuation
Does the semantic tone of an earnings announcement, as measured independently of the level of earnings surprise, affect stock price reaction. In his September 2011 paper entitled “Short-term Reactions to News Announcements”, Michal Dzielinski investigates the effect of the tone (positive, neutral or negative) of the words in earnings announcements and other company news on stock prices from… Keep Reading
September 26, 2011 - Equity Options
Does a simple strategy of iteratively selling covered calls (buy-write) on the Russell 2000 Index beat buying and holding the index? In their September 2011 paper entitled “15 Years of the Russell 2000 Buy‐Write”, Nikunj Kapadia and Edward Szado evaluate returns on ten alternative buy‐write strategies for the Russell 2000 Index. Specifically, they consider one-month and two-month maturities and five levels of approximate moneyness: at-the-money (ATM); 2% and 5%… Keep Reading
September 23, 2011 - Big Ideas
The conventional binary animal metaphor for markets is bull (good returns, low volatility) and bear (poor returns, high volatility). Does rigorous analysis of empirical evidence support belief in (just) two market states? In their September 2011 paper entitled “The Number of Regimes Across Asset Returns: Identification and Economic Value”, Mathieu Gatumel and Florian Ielpo apply a regime-switching model and Monte… Keep Reading
September 22, 2011 - Gold
Do the different ways of investing in gold produce similar outcomes? In their September 2011 paper entitled “A Comparative Analysis of the Investment Characteristics of Alternative Gold Assets”, Tim Pullen, Karen Benson and Robert Faff examine the diversification, hedging and safe haven properties of gold bullion, ten gold stocks, 11 gold mutual funds and two gold… Keep Reading
September 21, 2011 - Volatility Effects
In their September 2011 paper entitled “The Impact of Asymmetry on Expected Stock Returns: An Investigation of Alternative Risk Measures”. Stephen Huffman and Cliff Moll investigate the relation between various measures of lagged total, downside and upside risk and future daily stock returns. Specifically, they consider the following 12 alternative risk measured over rolling intervals of… Keep Reading
September 19, 2011 - Commodity Futures
What is the best way to incorporate commodities into a diversified portfolio? In her August 2011 paper entitled “Long-Short Commodity Investing: Implications for Portfolio Risk and Market Regulation”, Joelle Miffre studies the performance of long-short commodity strategies and their hedging properties with respect to traditional asset classes (proxied by the S&P 500 Index and Barclays Capital… Keep Reading