Investing Research Articles

What works for value stock investors? In his April 2012 paper entitled “Value Investing: Investing for Grown Ups?”, Aswath Damodaran explores success factors for three distinct types of value investing: (1) mechanical screening for stocks with value characteristics such as low earnings multiple, high book-to-market ratio and high return on investment; (2) taking contrarian positions in… Keep Reading

How attractive can currency trading be after optimizing across several anomalies? In the November 2011 version of their paper entitled “Beyond the Carry Trade: Optimal Currency Portfolios”, Pedro Barroso and Pedro Santa-Clara examine the performance of utility-maximized currency strategies designed to exploit interest rate variables, momentum, long-term reversal, current account and real exchange rate during the… Keep Reading

Does the variance risk premium (derived from the mostly positive gap between options-implied equity market volatility and actual equity market volatility) robustly predict stock market returns worldwide? In the March 2012 version of their paper entitled “Stock Return Predictability and Variance Risk Premia: Statistical Inference and International Evidence”, Tim Bollerslev, James Marrone, Lai Xu and… Keep Reading

Do economic announcements systematically remove uncertainty from financial markets and thus reliably lower implied volatility indexes? In their September 2010 paper entitled “The Impact of Macroeconomic Announcements on Implied Volatilities”, Roland Füss, Ferdinand Mager and Lu Zhao measure the reactions of the Chicago Board Options Exchange Volatility Index (VIX) and the DAX Volatility Index (VDAX)… Keep Reading

…evidence from a simple analysis of historical stock prices does not support a belief that homebuilder stocks are early warning indicators for equities in general.

What is the safest way to exploit asset price momentum? In his April 2012 paper entitled “Risk Premia Harvesting Through Momentum”  (the National Association of Active Investment Managers’ 2012 Wagner Award winner with different title), Gary Antonacci investigates systematic capture of upside volatility at the asset class level via a momentum/diversification/absolute return strategy that: Exploits momentum via long… Keep Reading

Stock price momentum strategies sometime crash, greatly detracting from long-term performance. Is there a reliable way to avoid the crashes? In the April 2012 version of their paper entitled “Managing the Risk of Momentum”, Pedro Barroso and Pedro Santa-Clara investigate usefulness of momentum portfolio volatility as a crash protection signal. They construct a momentum portfolio… Keep Reading

For which stocks does market-adjusted (idiosyncratic) volatility work as an indicator of future returns (see “No Reward for Risk?”)? In their January 2012 paper entitled “Dissecting the Idiosyncratic Volatility Anomaly”, Linda Chen, George Jiang, Danielle Xu and Tong Yao measure the idiosyncratic volatility premium in different subsamples of U.S. stocks. To measure the premium, they focus… Keep Reading

Was John Maynard Keynes, famous for contributions to macroeconomic hypotheses, a superior investor? In their March 2012 paper entitled “Keynes the Stock Market Investor”, David Chambers and Elroy Dimson evaluate the investment philosophy, strategies and performance of John Maynard Keynes based on his discretionary trading for the King’s College endowment (and, by similarity, for his own account). A… Keep Reading

Has the free flow of capital since the 1990s weakened geographic (country-based) equity market diversification benefits? In their November 2011 paper entitled “Is World Stock Market Co-Movement Changing?”, Douglas Blackburn and N. K. Chidambaran examine recent trends in co-movement of stock markets worldwide. Their analysis employs principal component analysis to identify country, regional and world equity market return factors,… Keep Reading