Investing Research Articles

Should investors consider a broader framework to encompass trend-following/momentum investing strategies? In his March 2013 paper entitled “Asset Price Trend Theory: Reframing Portfolio Theory from the Ground Up”, Robert Dubois presents a portfolio allocation strategy that explicitly includes an assumption that asset prices trend (exhibit return autocorrelation or intrinsic momentum). His approach augments risk management by… Keep Reading

Is there a good short-cut for constructing a low-beta portfolio? In their March 2013 paper entitled “Country and Sector Drive Low-Volatility Investing in Global Equity Markets”, Sanne de Boer, Janet Campagna and James Norman investigate the role of country and sector effects in low-volatility investing across global stock markets. They construct country-sector capitalization-weighted sub-indexes (for… Keep Reading

How do broker-employed stock analysts operate? In their March 2013 paper entitled “Inside the ‘Black Box’ of Sell-Side Financial Analysts”, Lawrence Brown, Andrew Call, Michael Clement and Nathan Sharp summarize the results of a survey and follow-up interviews designed to discover key inputs and incentives affecting sell-side equity analyst outputs, including earnings forecasts and stock… Keep Reading

Does the asset growth effect (growth is bad) exist in non-U.S. equity markets? In their July 2012 paper entitled “The Asset Growth Effect: Insights from International Equity Markets”, Akiko Watanabe, Yan Xu, Tong Yao and Tong Yu investigate the asset growth effect in and across international stock markets. They consider two tests, both based on annual… Keep Reading

Do Piotroski’s FSCORE for value stocks and Mohanram’s GSCORE for growth stocks predict winners and losers for non-U.S. stocks? In their March 2013 paper entitled “Fundamental Based Market Strategies”, Angelo Aspris, Nigel Finch, Sean Foley and Zachary Meyer apply previously documented fundamental (accounting-based) strategies to identify Australian stocks expected to outperform and underperform. Specifically, they consider FSCORE, GSCORE (sans advertising… Keep Reading

How do individuals perceive and position for Black Swans? In his March 2013 paper entitled “The Psychology of Tail Events: Progress and Challenges”, Nicholas Barberis employs a two-step framework to summarize recent research on the psychology of tail events. He first addresses belief about the probability of a tail event. He then covers actions/decisions based on this belief,… Keep Reading

How stable is the mean-variance efficient frontier specified by Modern Portfolio Theory (MPT), and what drives changes to it? In his March 2013 paper entitled “Principal Component Analysis of Time Variations in the Mean-Variance Efficient Frontier”, Andreas Steiner applies principal component analysis to explore sources of the variability in the efficient frontier. He uses weekly data and… Keep Reading

What proportion of long-short equity hedge fund managers effectively time the stock market? In their January 2013 paper entitled “Hedge Fund Managers’ Market Timing Skills”, Xin Li and Hany Shawky investigate whether long-short equity hedge funds (the oldest and largest hedge fund category) exhibit market timing skill by adjusting positions with market trends. Specifically, they… Keep Reading

Andrew Abraham, founder of Abraham Investment Management, prefaces his 2013 book, The Bible of Compounding Money: The Complete Guide to Investing with World Class Money Managers, by stating: “I wrote this book because I wanted to separate the snake oil from reality when investing. …By investing with world class money managers I have compounded money and thus… Keep Reading

Current price versus 10-month simple moving average (SMA) is a widely used indicator of asset and asset class trend, with current price above/below its 10-month SMA viewed as bullish/bearish. How has this indicator performed for U.S. equities in aggregate over the long run? To investigate, we employ the long-run data set of Robert Shiller to… Keep Reading