Investing Research Articles

A subscriber asked about extending “Simple Momentum Strategy Applied to TSP Funds” back in time to 1988. That test employs the following five funds, all available to U.S. federal government employees via the Thrift Savings Plan (TSP) as of January 2001: G Fund: Government Securities Investment Fund (G) F Fund: Fixed Income Index Investment Fund (F) C Fund: Common Stock… Keep Reading

Are high-quality stocks worth the price? In the June 2017 update of their paper entitled “Quality Minus Junk”, Clifford Asness, Andrea Frazzini and Lasse Pedersen investigate whether high-quality stocks outperform low-quality stocks. They define high-quality stocks as those that are profitable, growing, safe and well-managed. Specifically, they compute a single quality score for each stock by… Keep Reading

Is there a preferred frequency and are there preferred months for rebalancing conventional asset class portfolio holdings? To investigate we consider annual, semiannual and quarterly rebalancing of a simple portfolio targeting a 60-40 stocks-bonds mix. We consider all possible combinations of calendar month ends as rebalancing points. We ignore rebalancing (and dividend-reinvestment) frictions and tax implications, thereby… Keep Reading

Does an asset class breadth rule work better than a class-by-class exclusion rule for momentum strategy crash protection? In their July 2017 paper entitled “Breadth Momentum and Vigilant Asset Allocation (VAA): Winning More by Losing Less”, Wouter Keller and Jan Keuning introduce VAA as a dual momentum asset class strategy aiming at returns above 10% with drawdowns… Keep Reading

How differently does the “Simple Asset Class ETF Value Strategy” (SACEVS) perform when the U.S. stock market rises and falls? This strategy seeks to exploit relative valuation of the term risk premium, the credit (default) risk premium and the equity risk premium via exchange-traded funds (ETF). To investigate, because the sample period available for mutual funds is much longer than… Keep Reading

A subscriber asked how the “Simple Asset Class ETF Value Strategy” (SACEVS) performs when interest rates rise. This strategy seeks to exploit relative valuation of the term risk premium, the credit (default) risk premium and the equity risk premium via exchange-traded funds (ETF). To investigate, because the sample period available for mutual funds is much longer than that available for… Keep Reading

Do investors fixate on price-to-earnings ratio (P/E) and thereby create trading opportunities as P/Es change? In his June 2017 paper entitled “P/E Ratios and Value Investor Attention”, Jordan Moore examines market responses to U.S. common stocks sorted by earnings yield (inverse of P/E). He defines P/E as the ratio of stock price to the sum… Keep Reading

A subscriber asked for augmentation of “SACEMS at Weekly and Biweekly Frequencies” to determine whether bimonthly (every two months) measurement of asset class momentum works better than monthly measurement as used in “Simple Asset Class ETF Momentum Strategy” (SACEMS). To investigate, we apply a bimonthly strategy to the following eight asset class exchange-traded funds (ETF), plus cash:… Keep Reading

How well do stock index covered call strategies work across markets worldwide? In their June 2017 paper entitled “Covering the World: Global Evidence on Covered Calls”, Roni Israelov, Matthew Klein and Harsha Tummala test covered call strategies for 11 global equity indexes. They measure overall returns and return contributions from equity exposure, short volatility exposure and equity timing…. Keep Reading

Which short index options offer the best overall performance? In their June 2017 paper entitled “Which Index Options Should You Sell?”, Roni Israelov and Harsha Tummala explore return and risk properties of short delta-hedged out-of-the-money S&P 500 Index put and call options of various moneyness and maturities. They consider moneyness of -2.5 to +1.0 standard deviations relative to the… Keep Reading