Investing Research Articles

The model “Simple Asset Class ETF Momentum Strategy” (SACEMS) explores combinations of diversification and momentum as applied to exchange-traded fund (ETF) proxies for asset classes. As introduced, this strategy employed a baseline momentum ranking interval (six-month lagged ETF total return) to the following asset class ETFs, plus cash: PowerShares DB Commodity Index Tracking (DBC) iShares MSCI… Keep Reading

What does price momentum of stocks, whether total or risk-adjusted, imply about future returns of associated corporate bonds? In their August 2012 paper entitled “Residual Equity Momentum for Corporate Bonds”, Daniel Haesen, Patrick Houweling and Jeroen Van Zundert compare the predictive powers of total stock price momentum and risk-adjusted (residual) stock price momentum to predict returns of same-firm… Keep Reading

“CFOs vs. CEOs as Inside Traders” describes research finding that, based on data from before the Sarbanes-Oxley Act (SOX), investors should assume that Chief Financial Officers (CFO) are better inside traders than Chief Executive Officers (CEO). Does this finding hold after SOX? In the August 2012 update of their paper entitled “CEOs, CFOs, and COOs: Why Are… Keep Reading

Do equity styles and sectors exhibit exploitable momentum? In their August 2012 paper entitled “Do Style and Sector Indexes Carry Momentum?”, Linda Chen, George Jiang and Kevin Zhu investigate whether nine style indexes and 12 sector indexes exhibit price momentum. Each month, they form an equally weighted momentum portfolio that is long (short) the third of… Keep Reading

What is the best way to bet against beta in equity markets? In their August 2012 paper entitled “Beta-Arbitrage Strategies: When Do They Work, and Why?”, Tony Berrada, Reda Jurg Messikh, Gianluca Oderda and Olivier Pictet derive and test a dynamic low-beta portfolio strategy designed to maximize excess return relative to the market portfolio. They test… Keep Reading

Are valuation metrics for Real Estate Investment Trusts (REIT) useful indicators of future returns? In his June 2012 paper entitled “Modern Portfolio Theory as Applied to REITs”, Jeffrey Kerrigan evaluates the value premium among REITs. At the end of each month, he reforms equally weighted portfolios of the fifths (quintiles) of REIT stocks with the… Keep Reading

Is it practical to compare valuations of different stock markets? In his August 2012 paper entitled “Global Value: Building Trading Models with the 10 Year CAPE”, Mebane Faber investigates the usefulness of 10-year cyclically adjusted price-to-earnings ratio (CAPE, or P/E10) in determining relative values for 32 country stock markets. Specifically, he ranks all country markets based… Keep Reading

Does the latest generation of commodity futures indexes, which systematically exploits both backwardation and contango, outperform its predecessors? In her July 2012 paper entitled “Comparing First, Second and Third Generation Commodity Indices”, Joelle Miffre reviews the evolution of commodity futures indexes and assesses the performance of three groups of these indexes: (1) first generation, which are long-only and… Keep Reading

Does mean-variance optimization reliably beat simple equal weighting? In his August 2012 paper entitled “The Efficiency of Mean-Variance Optimization with In-depth Covariance Matrix Estimation and Portfolio Rebalancing”, Joonas Hämäläinen tests how many of 96 different mean-variance optimization implementations based on daily data outperform simple equal weighting after accounting for trading frictions. He considers three methods of determining weights… Keep Reading

How and how well does mean-variance investing work? In his August 2012 draft book chapter entitled “Mean‐Variance Investing”, Andrew Ang compares outcomes for complex asset allocation strategies based on forecasted return statistics to those for very simple strategies such as equal weighting. He illustrates with a horse race among allocation strategies applied to four asset classes (U.S. government bonds,… Keep Reading