Investing Research Articles

Is downside risk the critical driver of investor asset valuation? In the January 2013 version of their paper entitled “Conditional Risk Premia in Currency Markets and Other Asset Classes”, Martin Lettau, Matteo Maggiori and Michael Weber explore the ability of a simple downside risk capital asset pricing model (DR-CAPM) to explain and predict asset returns…. Keep Reading

Do time series carry (intrinsic value) and time series momentum (intrinsic momentum) strategies work across asset classes? What drives their returns, and how do they interact? In the January 2013 very preliminary version of their paper entitled “The Returns to Carry and Momentum Strategies: Business Cycles, Hedge Fund Capital and Limits to Arbitrage”, Jan Danilo Ahmerkamp and… Keep Reading

Wesley Gray (founder and executive managing member of Empiritrage LLC and Turnkey Analyst LLC) and Tobias Carlisle (founder and managing member of Eyquem Investment Management LLC) describe their 2013 book, Quantitative Value: A Practitioner’s Guide to Automating Intelligent Investment and Eliminating Behavioral Errors, as “first and foremost about value investment–treating stock as part ownership of a business valued through analysis of fundamental financial statement… Keep Reading

Do industries exhibit the market beta, value and momentum anomalies overall and in recent data? In his August 2012 paper entitled “The Failure of the Capital Asset Pricing Model (CAPM): An Update and Discussion”, Graham Bornholt examines the beta, value and momentum anomalies using returns for 48 U.S. industries. Each month, he forms three groups… Keep Reading

Does use of alphas from linear factor models to identify anomalies in U.S. stock returns mislead investors? In the February 2013 draft of their paper entitled “Using Maximum Drawdowns to Capture Tail Risk”, Wesley Gray and Jack Vogel investigate maximum drawdown (largest peak-to-trough loss over a time series of compounded returns) as a simple measure… Keep Reading

Do time-series (intrinsic) momentum rules for timing stocks beat comparable simple moving average (SMA) rules? In the February 2013 version of their paper entitled “Time-Series Momentum Versus Moving Average Trading Rules”, Ben Marshall, Nhut Nguyen and Nuttawat Visaltanachoti compare and contrast the stock portfolio timing results of intrinsic momentum and SMA rules. They compare intrinsic momentum… Keep Reading

Are target‐date (glidepath) funds that periodically decrease (increase) allocation to stocks (bonds and cash) as the investor ages competitive with alternative strategies? In his February 2013 paper entitled “The Glidepath Illusion: An International Perspective”, Javier Estrada evaluates three alternative types of strategies, all based on a working life of 40 years with annual retirement fund contributions… Keep Reading

…Carly Garner’s A Trader’s First Book on Commodities is a well-calibrated introduction (as advertised) to trading commodity futures and options, but readers will have to dig deeper for robust investigations of trading strategies.

Do low-beta equity strategies work differently for industries and countries compared to individual stocks? In their January 2013 paper entitled “The Low Risk Anomaly: A Decomposition into Micro and Macro Effects”, Malcolm Baker, Brendan Bradley and Ryan Taliaferro decompose the low-beta anomaly into individual stock (micro) and industry/country (macro) components. To study individual stock versus industry… Keep Reading

The conventional wisdom is that a high (low) ratio of equity put option volume to equity call option volume is bullish (bearish) because it indicates that investors are overly pessimistic (optimistic). Alternative measurements of the U.S. equity market put-call ratio are total options, index options and individual equity options. Index and equity option buyers may… Keep Reading