Investing Research Articles

Are illiquid assets competitive as investments with liquid financial assets over the long run? In his March 2016 paper entitled “The Long-Term Returns to Durable Assets”, Christophe Spaenjers summarizes long-term returns for three types of illiquid assets since the start of the 20th century: Houses and farmland. Collectibles (art, stamps, wine and violins). Gold, silver and diamonds. He focuses on… Keep Reading

Are the backtests provided for alternative beta investment products representative of their future live performance? In their March 2016 paper entitled “Quantifying Backtest Overfitting in Alternative Beta Strategies”, Antti Suhonen, Matthias Lennkh and Fabrice Perez compare the backtested and live performances of alternative beta products offered by investment banks. The strategies underlying these products are formulaic and non-discretionary, designed to extract… Keep Reading

How should investors (particularly retirees) think about balancing short-term crash risk and long-term portfolio sustainability? In their March 2016 paper entitled “Asset Allocation with Short and Long Term Risk Objectives”, Peng Wang and Jon Spinney present a way to balance short-term and long-term portfolio performance risks. They consider portfolios that each month allocate all funds in fixed weights to a… Keep Reading

Can a typical investor exploit the high returns reported for Piotroski’s FSCORE strategy as applied to U.S. stocks? In their October 2015 paper entitled “The Piotroski F-Score: A Fundamental Value Strategy Revisited from an Investor’s Perspective”, Christopher Krauss, Tom Kruger and Daniel Beerstecher examine whether individual investors can exploit the American Association of Individual Investors’ (AAII) interpretation of this strategy (24% gross… Keep Reading

Is there a best measure of investor sentiment for predicting stock market returns? In his March 2016 paper entitled “Investor Sentiment and Stock Market Returns”, Lee Smales updates relationships between stock market/portfolio returns and five sentiment measures: CBOE Implied Volatility Index (VIX). Baker-Wurgler composite sentiment index (readily available only through 2012). American Association of Individual Investors (AAII) investor sentiment. University of… Keep Reading

What is the best way to exploit short-term asset return reversal? In their November 2015 paper entitled “Market Closure and Short-Term Reversal”, Pasquale Della Corte, Robert Kosowski and Tianyu Wang examine four short-term reversal strategies that are each day long (short) assets with below-average (above-average) past returns weighted according to the degree the returns are below (above) average. Portfolio long… Keep Reading

Is the VIX futures roll yield (roll return) exploitable via exchange-traded products (ETPs) designed to track direct, levered or inverse VIX futures indexes? In their March 2016 paper entitled “VIX Exchange Traded Products: Price Discovery, Hedging and Trading Strategy”, Christoffer Bordonado, Peter Molnar and Sven Samdal test abilities of the seven most traded such ETPs (VXX, XIV, TVIX, UVXY, SVXY,… Keep Reading

Can investors avoid trend trading whipsaws by using Kalman filters to identify trends? In his February 2016 paper entitled “Trend Without Hiccups – A Kalman Filter Approach”, Eric Benhamou investigates the Kalman filter as a tool to smooth (remove the noise from) asset price series in an adaptive way that avoids most of the response lags of moving averages…. Keep Reading

Can investors beat the market by avoiding high volatility and embracing low volatility? In the April 2016 version of their paper entitled “Volatility Managed Portfolios”, Alan Moreira and Tyler Muir test the performance of a simple volatility timing approach that lowers (raises) exposure to risky assets when volatility of recent returns for those assets is relatively high (low). Contrary to conventional wisdom,… Keep Reading

Is systematically selling cash-covered equity index put options an attractive strategy? In his January 2016 paper entitled “An Analysis of Index Option Writing with Monthly and Weekly Rollover”, Oleg Bondarenko analyzes the performance of the CBOE S&P 500 PutWrite Index (PUT), launched in 2007, and the CBOE S&P 500 One-Week PutWrite Index (WPUT), launched in 2015…. Keep Reading