Investing Research Articles

What kinds of commodity futures portfolio allocation strategies work? In her December 2015 paper entitled “Long-Short Commodity Investing: A Review of the Literature”, Joelle Miffre summarizes recent academic studies that analyze the performance of long-short commodity futures strategies. She focuses on strategies exploiting roll yields, inventory levels, hedging pressure or momentum. She also surveys alternative… Keep Reading

Does asset allocation based on both trend following via a simple moving average (SMA) and return momentum work well? In the July 2015 update of their paper entitled “The Trend is Our Friend: Risk Parity, Momentum and Trend Following in Global Asset Allocation”, Andrew Clare, James Seaton, Peter Smith and Stephen Thomas examine the effectiveness of… Keep Reading

Does the information in short, intermediate and long stock price trends combined by relating multiple simple moving averages (SMA) to future returns usefully predict stock returns? In the September 2015 update of their paper entitled “A Trend Factor: Any Economic Gains from Using Information over Investment Horizons?”, Yufeng Han and Guofu Zhou examine a trend factor that simultaneously captures short, intermediate… Keep Reading

Do stock pricing factors predict option returns that are incremental to the factor premiums in underlying stock returns? In the December 2015 version of their paper entitled “Option Return Predictability”, Jie Cao, Bing Han, Qing Tong and Xintong Zhan examine whether 12 factors known to predict stock returns also predict delta-hedged (stock price-neutral) equity option returns. The 12 factors are: size,… Keep Reading

Is it possible to test factor models of stock returns directly on individual stocks rather than on portfolios of stocks sorted per preconceived notions of factor importance. In their November 2015 paper entitled “Tests of Alternative Asset Pricing Models Using Individual Security Returns and a New Multivariate F-Test”, Shafiqur Rahman, Matthew Schneider and Gary Antonacci apply a statistical… Keep Reading

Do stop-losses usefully mitigate downside risk in realistic scenarios? In their November 2015 paper entitled “Stop-Loss Strategies with Serial Correlation, Regime Switching, and Transactions Costs”, Andrew Lo and Alexander Remorov analyze the value of stop-losses when asset returns are autocorrelated (trending), regime switching (bull and bear) and subject to trading costs. They consider daily and 10-day measurement intervals, with respective stop-loss ranges of… Keep Reading

Are high-frequency sentiment feeds useful in predicting stock market behavior? In the November 2015 version of their paper entitled “Stock Return Predictability and Investor Sentiment: A High-Frequency Perspective”, Licheng Sun, Mohammad Najand and Jiancheng Shen measure the predictive power of half-hour changes in investor sentiment for subsequent half-hour U.S. stock market returns during the trading day. Their intraday sentiment… Keep Reading

How do the behaviors of time-series (absolute) and cross-sectional (relative) carry, momentum and value strategies differ? In the November 2015 version of their paper entitled “Dissecting Investment Strategies in the Cross Section and Time Series”, Jamil Baz, Nicolas Granger, Campbell Harvey, Nicolas Le Roux and Sandy Rattray explore time-series and cross-sectional carry, momentum and value strategies as applied to multiple… Keep Reading

A subscriber requested evaluation of Jay’s Pure Momentum Sector Fund System, specified by originator Jay Kaeppel as follows: At the end of the first month, assign 20% weight to the five of the 40 Fidelity Select Sector funds (excluding Select Gold, FSAGX) with the largest positive returns over the previous 240 trading days. At the end of… Keep Reading

Does long-term media coverage of a firm exert predictable pressure on its stock price? In the November 2015 version of their paper entitled “Ninety Years of Media Coverage and the Cross-Section of Stock Returns”, Alexander Hillert and Michael Ungeheuer examine relationships between firm media coverage and stock returns. Specifically, they relate long-term New York Times firm coverage/changes in… Keep Reading