Investing Research Articles

How does consideration of return distribution tails (not just linear correlations) affect assessment of global equity diversification benefits? In their May 2012 paper entitled “Is the Potential for International Diversification Disappearing? A Dynamic Copula Approach”, Peter Christoffersen, Vihang Errunza, Kris Jacobs and Hugues Langlois examine the evolution of equity market diversification benefits based on a methodology… Keep Reading

A subscriber suggested review of the Arora Report trading performance. According to the offeror, this performance derives from application of the “ZYX Change Method”, which “is the culmination of over a quarter of a century of experimentation in developing fundamental, technical, and quantitative models as well as implementing gray boxes to execute the models in… Keep Reading

Can reacting to short-term changes in asset return correlations improve efficient portfolio allocation? In their May 2012 paper entitled “The Role of Correlation Dynamics in Sector Allocation”, Elena Kalotychou, Sotiris Staikouras and Zhao Gang investigate the economic value of correlation timing in mean-variance optimal sector allocations. They test the usefulness of several correlation forecast methods by constructing dynamic,… Keep Reading

What is the big picture on stock return predictors? In their May 2012 paper entitled “The Supraview of Return Predictive Signals”, Jeremiah Green, John Hand and Frank Zhang examine aggregate characteristics of 333 signals for which formal research indicates power to predict stock returns. They categorize each signal as accounting-based (from firm financial statements, such as accruals), finance-based (directly or… Keep Reading

Are there exchange-traded notes (ETN) based on S&P 500 Index implied volatility (VIX) futures, or combinations of such ETNs, that are attractive for absolute return and diversification? In the May 2012 version of their paper entitled “Volatility Exchange-Traded Notes: Curse or Cure?”, Carol Alexander and Dimitris Korovilas examine the behaviors of simple (first generation) and enhanced (second… Keep Reading

Is reward-for-risk or reward-for-not taking risk the rule among stocks? In their April 2012 paper entitled “Low Risk Stocks Outperform within All Observable Markets of the World”, Nardin Baker and Robert Haugen measure performance differences between low-volatility stocks and high-volatility stocks in developed and emerging equity markets worldwide. They define a stock’s lagged volatility as the… Keep Reading

Should investors focus on relatively wild (high-volatility) or tame (low-volatility) stocks in emerging stock markets? In their April 2012 paper entitled “The Volatility Effect in Emerging Markets”, David Blitz, Juan Pang and Pim van Vliet examine the empirical relationship between risk and return in emerging equity markets. At the end of each month, they form equally-weighted quintile… Keep Reading

How do the technical trading rules that work best in a past study perform for new data? In the March 2012 version of their paper entitled “Predictability of the Simple Technical Trading Rules: An Out-of-Sample Test”, Jiali Fang, Ben Jacobsen and Yafeng Qin re-test performances of the 26 best technical trading rules from a 20-year old… Keep Reading

How do general economic conditions and economy-wide default risk shocks affect corporate bond returns, especially past winners and losers? In the May 2012 draft of their paper entitled “Sources of Momentum in Bonds”, Hwagyun Kim, Arvind Mahajan and Alex Petkevich investigate the relationship between U.S. corporate bond momentum portfolio returns and U.S. aggregate default risk. They measure the momentum effect… Keep Reading

Are there economic conditions that favor stock price momentum investing? In the May 2012 draft of their paper entitled “Momentum and Aggregate Default Risk”, Arvind Mahajan, Alex Petkevich and Ralitsa Petkova investigate the relationship between stock momentum portfolio returns and U.S. aggregate default risk. They measure the momentum effect as average monthly gross returns of overlapping hedge portfolios formed each… Keep Reading