March 29, 2012 - Individual Investing
Is individual investing truly a tale of woeful mistakes and biases? In their March 2012 paper entitled “No Skill, Mere Luck? – An Analysis of Individual Investors’ Investment Performance”, Andreas Hackethal, Steffen Meyer, Dennis Schmoltzi and Christian Stammschulte apply bootstrapping simulations based on actual portfolios to distinguish skill from luck among a sample of individual German investors…. Keep Reading
March 28, 2012 - Momentum Investing, Strategic Allocation
It is arguable that many exchange-traded fund (ETF) momentum strategy tests derive more from logical/programming simplicity than common portfolio management practices. Does momentum work for portfolios of ETFs when melded with the latter? In his March 2012 paper entitled “Tactical Asset Allocation Using Relative Strength”, John Lewis tests ETF momentum in the context of real-world… Keep Reading
March 27, 2012 - Technical Trading
Are there market conditions most conducive to stock pairs trading? In their March 2012 paper entitled “Losing Sight of the Trees for the Forest? Pairs Trading and Attention Shifts”, Heiko Jacobs and Martin Weber assess how big-picture turbulence relates to profitability of stock pairs trading, hypothesizing that big-picture distractions draw attention away from specific opportunities. Their… Keep Reading
March 26, 2012 - Economic Indicators, Political Indicators, Volatility Effects
Does political drama take over as the principal driver of U.S. stock market implied volatility during election seasons? In their March 2012 paper entitled “U.S. Presidential Elections and Implied Volatility: The Role of Political Uncertainty”, John Goodell and Sami Vähämaa compare the effects of political uncertainty to those of eight other sources of uncertainty on implied stock market… Keep Reading
March 23, 2012 - Bonds, Commodity Futures, Currency Trading, Economic Indicators, Volatility Effects
Are there economic and financial variables that meaningfully predict return volatilities of financial markets? In their March 2012 paper entitled “A Comprehensive Look at Financial Volatility Prediction by Economic Variables”, Charlotte Christiansen, Maik Schmeling and Andreas Schrimpf investigate the ability of 38 economic and financial variables to predict return volatilities of four asset classes (stocks, foreign… Keep Reading
March 21, 2012 - Economic Indicators
Can investors reliably exploit monetary expansion and contraction as signaled by decreases and increases in the Federal Funds Rate (FFR)? In the December 2011 version of his paper entitled “Don’t Fight the Fed!”, Paulo Maio investigates the predictive power of FFR for the equity risk premium and the profitability of trading strategies based on this… Keep Reading
March 20, 2012 - Commodity Futures
Do strategy-based commodity indexes introduced in recent years offer value to investors? In the February 2012 version of their paper entitled “Strategic and Tactical Roles of Enhanced Commodity Indices”, Georgios Rallis, Joelle Miffre and Ana-Maria Fuertes compare the returns and risks of enhanced long-only commodity indexes that exploit signals based on the time-to-maturity, momentum and term… Keep Reading
March 20, 2012 - Equity Options, Strategic Allocation
Are there strategic asset allocation methodologies that reliably beat equal weight? In the February 2012 version of their paper entitled “Portfolio Optimization Using Forward-Looking Information”, Alexander Kempf, Olaf Korn and Sven Sassning investigate the performance of a minimum variance portfolio based on returns implied by equity options rather than historical returns. They argue that, since option prices reflect the… Keep Reading
March 19, 2012 - Volatility Effects
Is “Shorting Leveraged ETF Pairs” a good idea? In their brief March 2012 paper entitled “Levered ETFs”, Wenxi Jiang and Hongjun Yan examine the returns from matched positions in long and short leveraged exchange-traded funds (ETF). Specifically, they calculate returns from shorting matched pairs. Using data for matched 2X/-2X and 3X/-3X ETFs during 2007 through 2011, they find that:
March 16, 2012 - Big Ideas, Investing Expertise
What do three prominent academic experts conclude when they review the body of evidence for and against the Efficient Markets Hypothesis (EMH), and therefore the potential benefit of speculation? In the April 2011 version of their paper entitled “Review of the Efficient Market Theory and Evidence”, Andrew Ang, William Goetzmann and Stephen Schaefer review the theoretical and… Keep Reading