Investing Research Articles

Do markets exploitably misprice stocks? In their July 2017 paper entitled “Global Market Inefficiencies”, Söhnke Bartram and Mark Grinblatt assess the exploitability of deviations from fair stock prices worldwide based on publicly known accounting data. Specifically, they each month: Regress market capitalizations of all stocks sampled on 21 annual accounting variables from most recently disclosed balance sheets… Keep Reading

Do stock scammers use Twitter to manipulate prices of microcap stocks? In his August 2017 paper entitled “Market Manipulation and Suspicious Stock Recommendations on Social Media”, Thomas Renault performs an event study to analyze returns for microcap stocks around spikes in Twitter activity about the stocks. He identifies tweets about a stock as those containing a… Keep Reading

Do changes in Twitter activity about a stock predict its future returns? In their July 2017 paper entitled “Is All that Twitters Gold? Social Media Attention and Stock Returns”, David Rakowski, Sara Shirley and Jeffrey Stark investigate whether Twitter activity: (1) drives noise trading by concentrating investor attention; and, (2) amplifies the effect of fundamental information in news… Keep Reading

What aspect of momentum strategy volatility is best for risk management? In his July 2017 paper entitled “Risk-Managed Momentum: The Effect of Leverage Constraints”, Federico Nucera examines stock momentum strategy risk management via different aspects of realized strategy variance with and without latitude for leverage. Specifically, he considers the following stock momentum strategy variations: Conventional… Keep Reading

Do the returns of iPath S&P 500 VIX Short-term Futures ETN (VXX) and VelocityShares Daily Inverse VIX Short-term ETN (XIV) vary systematically across days of the week? To investigate, we look at daily close-to-open, open-to-close and close-to-close returns for both. Using daily split-adjusted opening and closing prices for VXX during February 2009 through July 2017 and… Keep Reading

Do aggregate positions in put and call options on individual stocks, as indicators of sentiment of informed traders, predict future market returns? In their July 2017 paper entitled “Stock Return Predictability: Consider Your Open Options”, Farhang Farazmand and Andre de Souza examine the power of average value-weighted put option open interest divided by average value-weighted call option… Keep Reading

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