January 12, 2012 - Calendar Effects
…evidence from simple tests does not support a belief that investors/traders tend to exit the market before three-day weekends and re-enter after. There may be some tendency toward extra bullishness (bearishness) before (after) three-day weekends, but this tendency is not very consistent.
January 9, 2012 - Equity Options, Fundamental Valuation, Volatility Effects
Are realized (actual historical) and implied volatilities the whole story for equity option valuation? In their December 2011 paper entitled “Fundamental Analysis and Option Returns”, Theodore Goodman, Monica Neamtiu and Frank Zhang investigate the extent to which the equity options market fails to recognize volatility of firm operations (accounting data) and whether any such failure is… Keep Reading
January 5, 2012 - Commodity Futures, Momentum Investing, Volatility Effects
Can investors exploit idiosyncratic volatility exhibited by commodity futures? In their December 2011 paper entitled “Idiosyncratic Volatility Strategies in Commodity Futures Markets”, Adrian Fernancez-Perez, Ana-Maria Fuertes and Joelle Miffre investigate the usefulness of idiosyncratic volatility as a predictor of commodity futures returns. They define idiosyncratic volatility of commodity futures as return volatility not explained by contemporaneous variation in… Keep Reading
January 3, 2012 - Strategic Allocation, Volatility Effects
Are the relatively placid financial markets of the American Century evolving to a high-volatility regime in a more evenly competitive world? In his December 2011 paper entitled “Adaptive Markets and the New World Order”, Andrew Lo examines the implications of the Adaptive Markets Hypothesis (AMH), wherein “markets are not always efficient, but they are usually highly competitive… Keep Reading
December 30, 2011 - Momentum Investing, Volatility Effects
A subscriber suggested applying a simple momentum trading strategy to a set of leveraged equity style (size, value-growth) exchanged-traded funds (ETF), including leveraged long and leveraged short counterparts to exploit both positive and negative markets. It seems plausible that leverage may make funds react quickly and strongly to business cycle shifts that affect style performance. However, the costs… Keep Reading
December 29, 2011 - Miscellaneous
An update to the “What Works Best?” page makes the discussion more expansive (to address strategic asset allocation), shifts emphasis and adds references.
December 29, 2011 - Commodity Futures
How many commodity sectors are relevant for portfolio diversification planning, and how do their behaviors differ? In their December 2011 paper entitled “How Many Commodity Sectors Are There, and How Do They Behave?”, Geetesh Bhardwaj and Adam Dunsby examine the statistical properties of commodity futures prices to discover natural sectors and investigate how returns for these… Keep Reading
December 28, 2011 - Investing Expertise
Do stock analysts elected to All-American (AA) status by institutional voters (via Institutional Investor magazine) reliably out-pick other analysts? In the December 2011 update of their paper entitled “Are Stars’ Opinions Worth More? The Relation Between Analyst Reputation and Recommendation Values”, Lily Fang and Ayako Yasuda examine the average performance of stock recommendations of AA… Keep Reading
December 27, 2011 - Investing Expertise, Strategic Allocation
Is strategic asset class allocation or active management paramount for U.S. university endowment investment performance? In the October 2011 draft of their paper entitled “Do (Some) University Endowments Earn Alpha?”, Brad Barber and Guojun Wang explore the investment performance of U.S. university endowments with regard to overall alpha, performance persistence and sources of superior performance. They… Keep Reading
December 23, 2011 - Miscellaneous
An updated Investing Demons now includes relevant research summary statements from the past year. This section provides a broad perspective on the content of CXOadvisory.com.