Investing Research Articles

How can long-term investors maximize their edge of strategic patience? In their November 2011 paper entitled “Investing for the Long Run”, Andrew Ang and Knut Kjaer offer advice on successful long-term investing (such as by pension funds).  They define a long-term investor as one having no material short-term liabilities or liquidity demands. Using the California Public Employee’s Retirement System and other large institutions as examples,… Keep Reading

Is information technology moving in on qualitative event trading just as it has high-frequency quantitative algorithm trading? In the October 2011 version of their paper entitled “Event Driven Trading and the ‘New News’”, David Leinweber and Jacob Sisk examine the trading acumen of a model (set of filters) trained to exploit Thomson Reuters News Analytics metadata… Keep Reading

Does the size effect vary in an usefully predictable way? In the October 2011 revision of his paper entitled “Predicting the Small Stock Premium Over Different Horizons: What Do We Learn About Its Source?”, Valeriy Zakamulin examines whether eight U.S. market/economic variables exploitably predict the small stock premium at monthly, quarterly, semiannual and annual horizons. The eight… Keep Reading

An array of leveraged exchange-traded funds (ETF) track short-term (daily) changes in commodity and currency exchange indexes. Over longer holding periods, these ETFs tend to veer off track. The cumulative veer can be large. How do leveraged ETFs perform over a multi-year period? What factors contribute to their failure to track underlying indexes? To investigate,… Keep Reading

Do asset classes consistently exhibit momentum over the same time frame as stocks? In his January 2006 investing policy entitled “Class OutPerformance (COP) Strategy”, Mal Williams describes a dynamic asset allocation strategy based on intermediate-term total return momentum of fund proxies (a complex calculation spanning the past 12 months, but not simply the 12-month return) for… Keep Reading

Do somewhat abstract risk-based portfolio strategies translate to familiar stock/firm characteristic tilts? In their September 2011 paper entitled “Demystifying Equity Risk-Based Strategies: A Simple Alpha plus Beta Description”, Raul Leote de Carvalho, Xiao Lu and Pierre Moulin investigate how the following five risk-based equity allocation strategies relate to four common portfolio factors. Equal Weight – long… Keep Reading

Is momentum on a losing streak? Or, has proliferation of momentum strategies extinguished the anomaly? In the October 2010 revision of his paper entitled “Are Momentum Strategies Still Profitable for U.S. Equity?”, Scott Wilson examines the recent performance of a momentum hedge strategy that each month buys (sells) the tenth of stocks with the highest… Keep Reading

Does the S&P 500 Implied Volatility Index (VIX) measured at a monthly interval usefully predict stock market returns? To check, we consider four relationships: S&P 500 Depository Receipts (SPY) next-month return versus VIX monthly close. SPY next-month return versus VIX monthly range, a measure of the volatility of implied volatility. SPY next-month return versus product of VIX monthly change and SPY monthly return (to explore implications of VIX… Keep Reading

Should investors strategically diversify across widely known equity market anomalies? In the October 2011 version of his paper entitled “Strategic Allocation to Premiums in the Equity Market”, David Blitz investigates whether investors should treat anomaly portfolios (size, value, momentum and low-volatility) as diversifying asset classes and how they can implement such a strategy.  To ensure implementation is… Keep Reading

Do the size effect, value premium and momentum effect derive from common firm/stock characteristics other than size, book-to-market ratio and past return? In the October 2011 version of their paper entitled “Which Firms Are Responsible for Characteristic Anomalies? A Statistical Leverage Analysis”, Kevin Aretz and Marc Aretz statistically isolate and analyze the small minority of firms… Keep Reading