Investing Research Articles

How can investors capture returns from widely accepted risk factors associated with asset classes and subclasses? In the June 2013 version of his book chapter entitled “Factor Investing”, Andrew Ang provides advice on capturing risk premiums associated with factors such as value, momentum, illiquidity, credit risk and volatility risk. Based on the body of research,… Keep Reading

What do records of actual positions suggest about commodity futures trading success? In the June 2013 version of their paper entitled “Determinants of Trader Profits in Commodity Futures Markets”, Michaël Dewally, Louis Ederington and Chitru Fernando examine actual daily closing positions of energy futures traders to determine how profitability relates to differences in risk taking,… Keep Reading

A subscriber inquired whether the level of momentum (past return) for each asset in the “Momentum Strategy” indicates the level of future return for that asset, and whether extreme negative momentum supports shorting an asset. In other words, do each of these asset class proxies exhibit reliably exploitable intrinsic momentum? To investigate, we regress next-month return versus… Keep Reading

How does central bank quantitative easing (QE) affect various financial markets? In the May 2013 preliminary and incomplete version of his paper entitled “The Time Horizon of Price Responses to Quantitative Easing”, Harry Mamaysky investigates how U.S. Federal Reserve (Fed), European Central Bank (ECB) and Bank of England (BoE) QE announcements affect the prices of… Keep Reading

Reversion-to-trend appears to hold in many financial markets. Is this concept exploitable for country stock markets? In their June 2013 paper entitled “Do ‘Dogs of the World’ Bark or Bite? Evaluating a Mean-Reversion-Based Investment Strategy”, David Smith and Vladimir Pantilei test a simple “Dogs of the World” strategy designed to exploit long-term reversion across the 45… Keep Reading

Do asset classes generally exhibit enough price momentum to make stop-loss and re-entry rules effective for timing them? In his June 2013 paper entitled “Assessing Stop-loss and Re-entry Strategies”, Joachim Klement analyzes four stop-loss and re-entry rule pairs for six regional stock market indexes, a U.S. real estate investment trust (REIT) index, a commodity index and… Keep Reading

In the introduction to his 2013 book entitled The Alternative Answer: The Nontraditional Investments That Drive the World’s Best-Performing Portfolios, author Bob Rice (Alternative Investment Editor at Bloomberg Television) states that his: “…basic approach is an adaptation of the strategic asset allocation model that endowments have used for years, one that reflects two critical modifications. First, there… Keep Reading

Is the value premium consistent across equity markets worldwide? In their May 2013 paper entitled “Value around the World”, Nilufer Caliskan and Thorsten Hensyz measure returns for stock portfolios sorted on value in 41 countries and investigate how cultural differences affect the magnitude of the value premium. Each month in each country, they sort stocks… Keep Reading

Are there worldwide anomalies with regard to equity market returns by calendar month? In his June 2013 paper entitled “Stock Market Performance: High and Low Months”, Vichet Sum examines stock market performance in 70 countries to determine which months generate relatively high and low returns. He weights country stock markets equally in calculating worldwide statistics…. Keep Reading

Is faster-than-exponential asset price growth (acceleration of price increase) inherently unsustainable and therefore predictive of an eventual crash? In his June 2013 paper entitled, “Stock Crashes Led by Accelerated Price Growth”, James Xiong applies both regressions and rankings to test whether faster-than-exponential growth over the last two or three years predicts stock price crashes. Each month,… Keep Reading