July 27, 2015 - Gold
What is the scope of research on gold as an investment? In their July 2015 paper entitled “The Financial Economics of Gold – A Survey”, Fergal O’Connor, Brian Lucey, Jonathan Batten and Dirk Baur review the body of formal research on gold from the perspective of an investor. They start with the following background topics: how gold markets operate; physical gold demand and… Keep Reading
July 23, 2015 - Fundamental Valuation
What are current implications of cyclically adjusted price-earnings ratios (CAPE, P/E10 or Shiller PE), stock index level divided by average real earnings over the past ten years, across country equity markets worldwide? In his July 2015 paper entitled “CAPE around the World: Update 2015 – Return Differences and Exchange Rate Movements”, Joachim Klement analyzes expected returns in local currencies for equity markets around the… Keep Reading
July 22, 2015 - Momentum Investing, Value Premium, Volatility Effects
Has (hypothetical) equity factor investing worked as well in recent years as indicated in past studies? In his July 2015 paper entitled “Factor Investing Revisited”, David Blitz updates his prior study quantifying the performance of allocations to U.S. stocks based on three factor premiums: (1) value (high book-to-market ratio); (2) momentum (high return from 12 months… Keep Reading
July 21, 2015 - Commodity Futures, Volatility Effects
Can traders use S&P 500 Implied Volatility Index (VIX) options to exploit predictability in behaviors of underlying VIX futures. In his June 2015 paper entitled “Trading the VIX Futures Roll and Volatility Premiums with VIX Options”, David Simon examines VIX option trading strategies that: Buy VIX calls when VIX futures are in backwardation (difference between the front VIX… Keep Reading
July 13, 2015 - Investing Expertise, Mutual/Hedge Funds
Do any mutual funds reliably generate significant alpha and, if so, do fund investors receive this alpha? In their June 2015 paper entitled “Active Managers Are Skilled”, Jonathan Berk and Jules Van Binsbergen examine interactions among equity mutual fund gross alpha, assets under management, fees and net alpha. To measure a practical gross alpha, they benchmark active mutual fund… Keep Reading
July 10, 2015 - Volatility Effects
What volatility weighting scheme best exploits equity return volatility persistence based on net outcome? In the June 2015 version of his paper entitled “Dynamic Volatility Weighting in the Presence of Transaction Costs”, Valeriy Zakamulin examines a volatility weighting strategy with features that allow suppression of rebalancing frictions. The idea behind volatility weighting is to construct a portfolio that targets a specified (benchmark)… Keep Reading
July 9, 2015 - Momentum Investing
Is time series (intrinsic or absolute) momentum evident in international stock indexes and commodity indexes? In the June 2015 version of their paper entitled “The Trend is Your Friend: Time-Series Momentum Strategies Across Equity and Commodity Markets”, Athina Georgopoulou and George Wang test intrinsic momentum trading strategies that are each month long (short) equally weighted indexes with a… Keep Reading
July 8, 2015 - Fundamental Valuation, Technical Trading
Stock return anomaly studies based on firm accounting variables generally employ annually reformed portfolios that are long (short) the tenth of stocks expected to perform well (poorly). Does adding monthly portfolio updates based on technical stock price trend measurements boost anomaly portfolio performance? In the June 2015 version of their paper entitled “Anomalies Enhanced: The Use… Keep Reading
July 6, 2015 - Bonds, Equity Premium, Strategic Allocation
We have made three changes to the “Simple Asset Class ETF Value Strategy” (SACEVS) based on results of robustness tests and subscriber comments: To employ fresher data, we decrease the SACEVS S&P 500 Index level and bond/bill yield measurement interval from quarterly to monthly. S&P 500 Index operating earnings updates are still quarterly. To employ fresher data, we… Keep Reading
July 2, 2015 - Strategic Allocation
Which is better, sector-based or factor-based stock investing? In their June 2015 paper entitled “Factor-Based v. Industry-Based Asset Allocation: The Contest”, Marie Briere and Ariane Szafarz compare the attractiveness of sector-based and factor-based U.S. stock allocations. From Kenneth French’s data library, they extract return series for 10 sectors and five factors (size, value, profitability, investment and momentum). They expand the factor set to 10… Keep Reading