Investing Research Articles

Does the Sell-in-May/Halloween effect hold in recent data? In their April 2014 paper entitled “Sell in May and Go Away: Still Good Advice for Investors?”, Hubert Dichtl and Wolfgang Drobetz explore whether holding one of several stock indexes (cash) during November-April (May-October) beats buying and holding the index. They focus on sample periods since: (1) liquid index proxies are readily available… Keep Reading

Are investors exhausting the potential of stocks? In his May 2014 presentation packages entitled “Has The Stock Market Been ‘Overgrazed’?” and “Momentum Has Not Been ‘Overgrazed’”, Claude Erb investigates the proposition that sanguine research and ever easier access to investments are exhausting U.S. stock market investment opportunities. In the first package, he focuses on trends in the… Keep Reading

Does technical analysis boost or depress performance for individual investors? In their February 2014 paper entitled “Technical Analysis and Individual Investors”, Arvid Hoffmann and Hersh Shefrin combine actual trading histories and results of a survey to investigate the use of technical analysis by individual investors. The 2006 survey solicits objectives, strategies and traits from a large group of individual clients of an… Keep Reading

Does the relative performance of 10-year U.S. Treasuries and 30-year U.S. Treasuries offer a useful risk-on/risk-off regime change signal? In their February 2014 paper entitled “An Intermarket Approach to Tactical Risk Rotation Using the Signaling Power of Treasuries to Generate Alpha and Enhance Asset Allocation” (the National Association of Active Investment Managers’ 2014 Wagner Award third place winner), Michael Gayed and Charles Bilello… Keep Reading

Is is feasible to exploit stock price deviation from a purely statistical estimate of equilibrium? In his February 2014 paper entitled “Back to Black” (the National Association of Active Investment Managers’ 2014 Wagner Award second place winner), Arthur Grabovsky investigates exploitation of a model based on assumptions that: (1) unpredictable investor behavior sometimes makes stock price deviate from equilibrium; and, (2) price then tends… Keep Reading

Is there a practical way to mitigating data snooping bias while exploring optimal parameter values? In his February 2014 paper entitled “Know Your System! – Turning Data Mining from Bias to Benefit through System Parameter Permutation” (the National Association of Active Investment Managers’ 2014 Wagner Award winner), Dave Walton outlines System Parameter Permutation (SPP) as an alternative to traditional in-sample/out-of-sample cross-validation and other more complex approaches… Keep Reading

Research (see “Asset Growth Rate as a Return Indicator” and “Asset Growth a Bad Sign for Stocks Everywhere?”) indicates that stocks of firms with high asset growth rates tend subsequently to underperform the market. Does this finding translate to the overall stock market? In the April 2014 version of his paper entitled “Asset Growth and Stock Market Returns:… Keep Reading

What factors make asset class diversification work? To investigate empirically, we consider the following mix of exchange-traded funds (ETF) as asset class proxies (the same used in “Simple Asset Class ETF Momentum Strategy”): PowerShares DB Commodity Index Tracking (DBC)iShares MSCI Emerging Markets Index (EEM)iShares MSCI EAFE Index (EFA)SPDR Gold Shares (GLD)iShares Russell 1000 Index (IWB)iShares Russell 2000 Index (IWM)SPDR Dow Jones REIT (RWR)iShares Barclays… Keep Reading

In the introduction to his 2014 book entitled Global Value: How to Spot Bubbles, Avoid Market Crashes, and Earn Big Returns in the Stock Market, author Mebane Faber, ponders: “Can we or can’t we predict when a bubble is occurring? Below we [try] to find an objective way to identify bubbles, avoid their popping, and invest in their aftermath.”… Keep Reading

How sensitive in a recent sample are outcomes from simple trend following rules to the length of the measurement interval used to detect a trend. To investigate, we consider two simple types of trend following rules as applied to the U.S. market: Hold a risky asset when its price is above its x-month simple moving average (SMAx) and… Keep Reading