June 21, 2012 - Investing Expertise, Mutual/Hedge Funds
Do top-performing mutual funds reliably continue to be top performers. In their June 2012 semiannual report entitled “Does Past Performance Matter? S&P Persistence Scorecard”, Standard and Poor’s summarizes performance persistence statistics for U.S. mutual funds overall and for funds grouped by capitalization focus of holdings. They measure persistence of the top 25% (quartile) and top… Keep Reading
June 20, 2012 - Commodity Futures
How has recent data meshed with seminal research on commodity futures? In the June 2012 version of their paper entitled “Commodity Investing”, Geert Rouwenhorst and Ke Tang review and update research relevant to investing in commodity futures, with trader positions recorded via Commitments of Traders (COT) reports issued by the Commodity Futures Trading Commission monthly during 1986 through 1992,… Keep Reading
June 13, 2012 - Equity Premium, Strategic Allocation
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
June 12, 2012 - Individual Gurus
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
June 6, 2012 - Strategic Allocation
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
June 4, 2012 - Big Ideas, Strategic Allocation
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
May 31, 2012 - Strategic Allocation, Volatility Effects
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
May 29, 2012 - Volatility Effects
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
May 29, 2012 - Volatility Effects
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
May 28, 2012 - Technical Trading
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