Investing Research Articles

Does news lead the stock market? In his September 2011 paper entitled “Reuters Sentiment and Stock Returns”, Matthias Uhl tests whether aggregate Thomson Reuters news sentiment (feeling, opinion or emotion evoked while reading a Reuters news article) predicts stock market returns at a monthly frequency. He aggregates monthly sentiment by summing individual articles coded as evoking positive… Keep Reading

Does the semantic tone of an earnings announcement, as measured independently of the level of earnings surprise, affect stock price reaction. In his September 2011 paper entitled “Short-term Reactions to News Announcements”, Michal Dzielinski investigates the effect of the tone (positive, neutral or negative) of the words in earnings announcements and other company news on stock prices from… Keep Reading

Does a simple strategy of iteratively selling covered calls (buy-write) on the Russell 2000 Index beat buying and holding the index? In their September 2011 paper entitled “15 Years of the Russell 2000 Buy‐Write”, Nikunj Kapadia and Edward Szado evaluate returns on ten alternative buy‐write strategies for the Russell 2000 Index. Specifically, they consider one-month and two-month maturities and five levels of approximate moneyness: at-the-money (ATM); 2% and 5%… Keep Reading

The conventional binary animal metaphor for markets is bull (good returns, low volatility) and bear (poor returns, high volatility). Does rigorous analysis of empirical evidence support belief in (just) two market states? In their September 2011 paper entitled “The Number of Regimes Across Asset Returns: Identification and Economic Value”, Mathieu Gatumel and Florian Ielpo apply a regime-switching model and Monte… Keep Reading

Do the different ways of investing in gold produce similar outcomes? In their September 2011 paper entitled “A Comparative Analysis of the Investment Characteristics of Alternative Gold Assets”, Tim Pullen, Karen Benson and Robert Faff examine the diversification, hedging and safe haven properties of gold bullion, ten gold stocks, 11 gold mutual funds and two gold… Keep Reading

In their September 2011 paper entitled “The Impact of Asymmetry on Expected Stock Returns: An Investigation of Alternative Risk Measures”. Stephen Huffman and Cliff Moll investigate the relation between various measures of lagged total, downside and upside risk and future daily stock returns. Specifically, they consider the following 12 alternative risk measured over rolling intervals of… Keep Reading

What is the best way to incorporate commodities into a diversified portfolio? In her August 2011 paper entitled “Long-Short Commodity Investing: Implications for Portfolio Risk and Market Regulation”, Joelle Miffre studies the performance of long-short commodity strategies and their hedging properties with respect to traditional asset classes (proxied by the S&P 500 Index and Barclays Capital… Keep Reading

A reader suggested reviewing the detailed track record of SweetSpot Investments LLC, consisting of 29 closed trades over the past 12 years. The basic SweetSpot strategy posits market-beating three-year reversion of the three least popular “sectors” out of 100 formed from 500 non-diversified mutual funds and exchange-traded funds (ETF). Popularity is a function of fund assets and prior-year… Keep Reading

Do sophisticated asset allocation strategies beat simple ones? In the December 2010 version of their paper entitled “Risk Parity Portfolio vs. Other Asset Allocation Heuristic Portfolios”, Denis Chaves, Jason Hsu Feifei Li and Omid Shakernia conduct a horse race among six asset allocation weighting strategies applied to nine asset classes: 60/40: 60% S&P 500 Index/40% Barclays Capital… Keep Reading

In his 2011 book entitled The Market Taker’s Edge: Insider Strategies from the Options Trading Floor, author Dan Passarelli “offers lessons from the trading pits from the perspective of a professional trader turned options evangelist for the benefit of both aspiring professional traders and nonprofessional traders alike.” According to the book’s foreword: “What the trading industry has needed is… Keep Reading