Investing Research Articles

Is there an exploitable way to predict when short-term stock market return will be negative? In his June 2018 paper entitled “Predictable Downturns”, Carter Davis tests a random forest regression-based forecasting model to predict next-day U.S. stock market downturns. He uses the value-weighted return of a portfolio of the 10 U.S. stocks with the largest market… Keep Reading

Each week the media report U.S. initial and continued unemployment claims (seasonally adjusted) as a potential indicator of future U.S. stock market returns. Do these indicators move the market? To investigate, we focus on weekly changes in unemployment claims during a period of “modern” information dissemination to release-day and next-week stock market returns. By modern… Keep Reading

Are there any gold trading strategies that reliably beat buy-and-hold? In their April 2018 paper entitled “Investing in the Gold Market: Market Timing or Buy-and-Hold?”, Viktoria-Sophie Bartsch, Dirk Baur, Hubert Dichtl and Wolfgang Drobetz test 4,095 seasonal, 18 technical, and 15 fundamental timing strategies for spot gold and gold futures. These strategies switch at the end of each month… Keep Reading

Is it suboptimal to employ the same asset class proxy universe both to exploit momentum and to avoid crashes? In their July 2018 paper entitled “Breadth Momentum and the Canary Universe: Defensive Asset Allocation (DAA)”, Wouter Keller and Jan Willem Keuning modify their Vigilant Asset Allocation (VAA) by substituting a separate “canary” asset class universe for crash protection… Keep Reading

Brian Portnoy introduces his 2018 book, The Geometry of Wealth: How To Shape A Life Of Money And Meaning, by stating that the book is: “…a story told in three parts,…from purpose to priorities to tactics. Each step has a primary action associated with it. The first is adaptation. The second is prioritization. The third is simplification…. Keep Reading

The many factor-based indexes and exchange-traded funds (ETFs) that track them now available enable investors to construct multi-factor portfolios piecemeal. Is such piecemeal construction suboptimal? In their July 2018 paper entitled “The Characteristics of Factor Investing”, David Blitz and Milan Vidojevic apply a multi-factor expected return linear regression model to explore behaviors of long-only factor portfolios. They consider six factors: value-weighted… Keep Reading

Does sentiment on StockTwits and Twitter social media platforms usefully predict returns for individual stocks? In their June 2018 paper entitled “Momentum, Mean-Reversion and Social Media: Evidence from StockTwits and Twitter”, Shreyash Argarwal, Pablo Azar, Andrew Lo and Taranjit Singh analyze relationships between stock price behaviors and real-time measures of sentiment uniquely attributable to StockTwits and Twitter in three ways:… Keep Reading

Is Warren Buffett’s track record explicable and replicable? In the June 2018 update of their paper entitled “Buffett’s Alpha”, Andrea Frazzini, David Kabiller and Lasse Pedersen model Warren Buffett’s exceptional investing performance based on replicating exposures of Berkshire Hathaway overall and of its publicly traded holdings to six factors. Four of the factors are those conventionally used to… Keep Reading

A betting against beta (BAB) portfolio is long low-beta assets and short high-beta assets, with each side leveraged to a beta of one. Do strong past stock market returns (when investors tend to overweight high-beta stocks) predict an increase in BAB returns? In his June 2018 paper entitled “Time-Varying Leverage Demand and Predictability of Betting-Against-Beta”, Esben Hedegaard tests the prediction that… Keep Reading

How do so many active managers who underperform passive investment alternatives continue to attract and retain investors? In their June 2018 paper entitled “How Active Management Survives”, J.B. Heaton and Ginger Pennington test the hypothesis that investors fall prey to the  conjunction fallacy, believing that hard work should generate outperformance. Specifically, they conduct two online surveys: Sample 1:… Keep Reading