Investing Research Articles

Do stocks worldwide generate most of their total return while the market is open or closed? In their October 2015 paper entitled “Making Money While You Sleep? Anomalies in International Day and Night Returns”, Kevin Aretz and Sohnke Bartram decompose returns and factor premiums into day and night components. When aggregating returns across countries, they first average… Keep Reading

Do both asset-level and portfolio-level risk management techniques enhance portfolio performance? In the October 2015 version of his paper entitled “Optimal Dynamic Portfolio Risk Management”, Valeriy Zakamulin investigates risk management across assets (relative weighting of risky assets) and risk management over time (timing the market via positions in the risk-free rate/leverage). For risk management across risky assets, he consider equal weighting,… Keep Reading

What are pros and cons of extending the definition of financial index beyond conventional market capitalization (buy-and-hold) weighting? In the October 2015 draft of his paper entitled “What Is an Index?”, Andrew Lo proposes that any portfolio satisfying three properties should be considered an index: (1) transparent (public and verifiable); (2) investable (realistic and liquid benchmark); and, (3) entirely rules-based (allowing… Keep Reading

Is gold a consistent hedge against inflation? In their October 2015 preliminary paper entitled “Is Gold a Hedge Against Inflation? A Wavelet Time-Frequency Perspective”, Thomas Conlon, Brian Lucey and Gazi Salah Uddin examine the inflation-hedging properties of gold over an extended period at different measurement frequencies (investment horizons) in four economies (U.S., UK, Switzerland and Japan). They consider both realized and… Keep Reading

Does timing the U.S. stock market with moving averages work? In his October 2015 paper entitled “A Comprehensive Look at the Real-Life Performance of Moving Average Trading Strategies”, Valeriy Zakamulin employs a very long dataset to estimate out-of-sample performance and robustness (subsample performance) of four distinct technical trading rules. Specifically, he seeks answers to the following questions: How… Keep Reading

Are frontier government bonds useful as incremental diversifiers of diversified portfolios? In their September 2015 paper entitled “Frontier and Emerging Government Bond Markets”, Vanja Piljak and Laurens Swinkels examine the diversification value of U.S. dollar-denominated frontier government bonds at aggregate, regional and country levels. They first look at return correlations and then consider mean-variance portfolio optimization with global equities, U.S…. Keep Reading

Does the third moment (skewness) of commodity futures return distributions predict subsequent returns? In the October 2015 version of their paper entitled “Commodities as Lotteries: Skewness and the Returns of Commodity Futures”, Adrian Fernandez-Perez, Bart Frijns, Ana-Maria Fuertes and Joelle Miffre examine the relationship between skewness and future returns in commodity futures markets. They calculate futures series returns as the difference… Keep Reading

Do small capitalization stocks exploitably lag broad market trends? In their October 2015 paper entitled “Slow Trading and Stock Return Predictability”, Matthijs Lof and Matti Suominen investigate whether overall stock market trends predict variation in the size effect and therefore the performance of small capitalization exchange-traded funds (ETF). For size effect testing, they each year at the end… Keep Reading

Are trend following (intrinsic or time series momentum) and risk parity complementary multi-class portfolio construction approaches? In his October 2015 paper entitled “Trend-Following, Risk-Parity and the Influence of Correlations”, Nick Baltas compares performances of inverse volatility weighting and risk parity weighting as adapted to a long-short trend following strategy. Unlike volatility weighting, risk parity weighting incorporates… Keep Reading

Is there a simple way to improve the performance of conventional asset class target allocations by rotating to strength within classes based on Relative Strength Index (RSI)? In his September 2015 paper entitled “Momentum Investing and Asset Allocation”, Drew Knowles seeks to improve the performance of baseline asset class (equity, fixed income, hedge fund) allocations via dynamic intra-class rotation… Keep Reading