Investing Research Articles

What is the state of the hedge fund industry? In the July 2015 draft of their paper entitled “Hedge Funds: A Dynamic Industry In Transition”, Mila Getmansky, Peter Lee and Andrew Lo review recent academic research on hedge funds and update industry performance statistics. They surmise that  hedge fund data from 10 years ago may be unrepresentative of today’s… Keep Reading

Does firm news reliably interact with stock return anomalies? In their July 2015 paper entitled “Anomalies and News”, Joseph Engelberg, David McLean and Jeffrey Pontiff compare anomaly returns on days with and without firm-specific news releases. They consider 97 anomalies published in 80 academic papers. For some analyses, they segregate these anomalies into four categories: (1) firm event-related (such as stock… Keep Reading

Are currency carry and momentum strategies complementary? If so, why? In their July 2015 paper entitled “Carry and Trend Following Returns in the Foreign Exchange Market”, Andrew Clare, James Seaton, Peter Smith and Steve Thomas examine how market liquidity affects returns to currency carry and trend following strategies and test the benefits of combining these two strategies. They measure carry strategy returns… Keep Reading

Can investors refine and exploit the upward bias of overnight stock returns? In the July 2015 version of her paper entitled “Night Trading: Lower Risk but Higher Returns?”, Marie-Eve Lachance presents a way of sorting stocks by strength of overnight return bias and investigates gross and net profitability of associated overnight-only investment strategies. Specifically, she each month regresses daily… Keep Reading

Should investors adopt a mutual fund for the long term, or should they occasionally switch to funds with fresh ideas and energy? In the July 2015 draft of their paper entitled “Milk or Wine: Mutual Funds’ (Dis)economies of Life”, Laura Dahm and Christoph Sorhage investigate whether mutual fund performance tends to decline or improve with age. They… Keep Reading

Does the ratio of aggregate U.S. stock market valuation (MV) to U.S. Gross National Product (GNP) or Gross Domestic Product (GDP), the approximate value of goods and services produced by U.S. companies, reliably indicate stock market overvaluation? In their July 2015 paper entitled “Can Warren Buffett Also Predict Equity Market Downturns?”, Sebastien Lleo and William Ziemba investigate… Keep Reading

Do dual-sorts of country stock market predictive factors add value to single-sorts? In the July 2015 version of his paper entitled “Combining Equity Country Selection Strategies” Adam Zaremba first re-examines earnings-price ratio (E/P), momentum (return from 12 months ago to one month ago), skewness (based on the last 24 monthly returns) and turnover ratio (average monthly turnover for the… Keep Reading

“Measuring the Level and Persistence of Active Fund Management” (pro) and “Fund Activeness Predicts Performance?” (con) summarize debate on the ability of Active Share, how much portfolio holdings differ from a benchmark index, to predict mutual fund performance. The authors of the con paper summarized in the latter (principals of AQR Capital Management) assert that “neither theory nor data… Keep Reading

Does the S&P 500 implied volatility index (VIX) exhibit systematic behaviors by day of the week, around turn-of-the-month (TOTM) or around options expiration (OE)? If so, are the behaviors exploitable? Using daily closing levels of VIX since January 1990, daily opening levels of VIX since January 1992 and daily reverse split-adjusted opening and closing levels of iPath… Keep Reading

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