Investing Research Articles

How, in a nutshell, do momentum investing strategies work? In his December 2017 paper entitled “Keep Up the Momentum”, Thierry Roncalli summarizes the nature of the momentum premium in a less mathematical way than in the previously available “Understanding the Momentum Risk Premium: An In-Depth Journey Through Trend-Following Strategies”. He distinguishes between: Time-series or trend-following or intrinsic or… Keep Reading

Does the increase in number of Bitcoin wallets at a rate that far exceeds growth in number of Bitcoins explain the dramatic rise in Bitcoin price? In the December revision of his paper entitled “Metcalfe’s Law as a Model for Bitcoin’s Value”, Timothy Peterson models Bitcoin price according to Metcalfe’ Law, which posits that the value of… Keep Reading

“Usefulness of P/E10 as Stock Market Return Predictor” investigates whether P/E10 (or Cyclically Adjusted Price-Earnings ratio, CAPE) usefully predicts U.S. stock market returns over the long run. That analysis employs Robert Shiller’s data set, which defines P/E10 as inflation-adjusted S&P Composite Index level divided by average monthly inflation-adjusted 12-month trailing earnings of index companies over the last ten years…. Keep Reading

A subscriber proposed: “It would be interesting to do an analysis of the Chemical Activity Barometer [CAB] to see if it has predictive value for the stock market. Either [look] at stock prices when [CAB makes] a two percent pivot down [from a preceding 6-month high] as a sell signal and one percent pivot up as… Keep Reading

Subscribers have suggested an alternative approach for the “Simple Asset Class ETF Momentum Strategy” (SACEMS) designed to suppress trading by holding past winners until they fall further in the rankings than in the baseline specification. SACEMS each month picks winners from the following set of exchange-traded funds (ETF) based on total returns over a specified lookback… Keep Reading

Do strategies that seek to exploit return volatility persistence by adjusting stock market exposure inversely with recent market volatility relative to some target (including exposures greater than 100%) produce obvious benefits for investors? In their November 2017 paper entitled “Tail Risk Mitigation with Managed Volatility Strategies”, Anna Dreyer and Stefan Hubrich examine usefulness of managing volatility in this… Keep Reading

What is the best way to think about reliabilities and risks of various anomaly premiums commonly that investors believe to be available for exploitation? In their December 2017 paper entitled “A Framework for Risk Premia Investing”, Kari Vatanen and Antti Suhonen present a framework for categorizing widely accepted anomaly premiums to facilitate construction of balanced investment strategies. They… Keep Reading

What is the best way to implement futures momentum and manage its risk? In their November 2017 paper entitled “Risk Adjusted Momentum Strategies: A Comparison between Constant and Dynamic Volatility Scaling Approaches”, Minyou Fan, Youwei Li and Jiadong Liu compare performances of five futures momentum strategies and two benchmarks: Cross-sectional, or relative, momentum (XSMOM) – each month long… Keep Reading

Are there rational ways to decide whether cryptocurrencies such as Bitcoin are in bubbles? In their December 2017 paper entitled “Datestamping the Bitcoin and Ethereum Bubbles”, Shaen Corbet, Brian Lucey and Larisa Yarovaya test for bubbles in Bitcoin and Ethereum price series. For valuation, they consider three potential cyrptocurrency price drivers: Blockchain length, reflecting difficulty of finding a new… Keep Reading

How efficiently can a sophisticated fund manager implement long-only stock momentum portfolios? In their December 2017 paper entitled “Implementing Momentum: What Have We Learned?”, Adrienne Ross, Tobias Moskowitz, Ronen Israel and Laura Serban use seven years of live data for long-only U.S. and international momentum funds to measure the import of implementation frictions. They segment these frictions into turnover/trading costs,… Keep Reading