September 14, 2011 - Strategic Allocation
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
September 13, 2011 - Equity Options
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
September 12, 2011 - Animal Spirits
Do investors in aggregate respond to “staged” CEO visibility? In the August 2011 update of their paper entitled “CEO Interviews on CNBC”, Felix Meschke and Andy Kim investigate whether planned interviews with CEOs on financial television systematically affect associated stock prices over the days before and after the interview. The authors focus on the interval… Keep Reading
September 9, 2011 - Momentum Investing
What is the state of momentum investing? In their January 2011 paper entitled “Momentum”, Narasimhan Jegadeesh and Sheridan Titman summarize equity price momentum research and discuss explanations for the momentum anomaly. Specifically, they address equity momentum investing performance during 1990 through 2009, and the firm characteristics and market conditions that affect momentum returns. Based on a review of… Keep Reading
September 8, 2011 - Mutual/Hedge Funds
Do hedge funds rely on off-the-beaten-track (illiquid) positions to fuel performance? In his April 2011 paper entitled “Hedge-Fund Performance and Liquidity Risk”, Ronnie Sadka investigates aggregate market liquidity as a predictor of hedge fund performance. His calculates liquidity based on trade-by-trade price impact estimated monthly for individual stocks and aggregated by averaging. Using net monthly returns… Keep Reading
September 7, 2011 - Economic Indicators
Can traders reliably play price jumps associated with surprising economic news releases? In their September 2011 paper entitled “Information Driven Price Jumps and Trading Strategy: Evidence from Stock Index Futures”, Hong Miao, Sanjay Ramchander and Kenton Zumwalt examine the relationship between surprises in announcements for eight U.S. macroeconomic indicators and jump returns for Dow Jones Industrial Average (DJIA), NASDAQ Composite… Keep Reading
September 6, 2011 - Sentiment Indicators
Does aggregate social network sentiment, as measured by Facebook’s Gross National Happiness (GNH), predict future stock market returns? In his August 2011 preliminary draft paper entitled “Can Facebook Predict Stock Market Activity?”, Yigitcan Karabulut investigates the relationship between GNH as a proxy for investor sentiment and stock market activity. Per Facebook, GNH derives from “…millions of… Keep Reading
September 2, 2011 - Momentum Investing, Technical Trading
Does a strategy of combining monthly individual stock return reversal with monthly industry momentum enhance results compared to the separate strategies. In their August 2011 paper entitled “One-month Individual Stock Return Reversals and Industry Return Momentum”, Marc Simpson, Emiliano Giudici and John Emery examine the relationship between individual stock return reversals and industry momentum by considering… Keep Reading
September 1, 2011 - Aesthetic Investments, Individual Investing
Is fine wine a good investment? Two recent studies are on the case. In their February 2010 paper entitled “Raise your Glass: Wine Investment and the Financial Crisis”, Philippe Masset and Jean-Philippe Weisskopf examine the risk, return and diversification benefits of fine wine. In their August 2011 paper entitled “Is Wine a Premier CRU Investment?”, Liam Devine… Keep Reading
August 31, 2011 - Big Ideas
Analyses such as those described in “Demographic Headwind for U.S. Stock Market?” and “Classic Research: Demography and the Stock Market” assess the impact of demographic changes on the stock market by focusing on market valuation as measured by price-earnings ratio (P/E). What story would a more direct analysis of demographics and stock market returns tell?… Keep Reading