February 23, 2011 - Economic Indicators
Are there reliable lead-lag relationships among stock market returns, changes in the Federal Funds Rate (FFR) and changes in Treasury bond yields? In their February 2011 paper entitled “The US Stock Market Leads the Federal Funds Rate and Treasury Bond Yields”, Kun Guo, Wei-Xing Zhou, Si-Wei Cheng and Didier Sornette apply a new “thermal optimal… Keep Reading
February 22, 2011 - Equity Options
Do options quote movements anticipate those of underlying stocks? In other words, are options traders systematically more informed than stock traders? In their January 2011 paper entitled “Is There Price Discovery in Equity Options?”, Dmitriy Muravyev, Neil Pearson and John Paul Broussard test the lead-lag relationship between the bid-ask ranges of equity options and the… Keep Reading
February 21, 2011 - Big Ideas
In his 2010 book Wave Theory for Alternative Investments: Riding the Wave with Hedge Funds, Commodities, and Venture Capital, author Stephen Todd Walker asserts that “dynamic asset allocation (as opposed to static allocation) is imperative… In my view, now is the time that one should be adding alternatives to a well-diversified portfolio. It is time… Keep Reading
February 17, 2011 - Equity Premium
How have S&P 500 firms performed over the past two decades, in aggregate and individually, relative to reasonable investor expectations? In their February 2011 brief entitled “Shareholder Value Creators in the S&P 500: 1991-2010”, Pablo Fernandez, Javier Aguirreamalloa and Luis Corres tabulate the creation of value by major U.S. firms for long-term shareholders relative to… Keep Reading
February 16, 2011 - Big Ideas
Is there a window of exploitation before prices of individual stocks incorporate relevant information shocks? If so, what is its duration? In their January 2011 paper entitled “Speed of Convergence to Market Efficiency: The Role of ECNs”, Dennis Chung and Karel Hrazdil investigate the duration of stock price inefficiency based on the time interval over… Keep Reading
February 15, 2011 - Equity Options
A reader asked: “Do you have any research on the phenomenon of ‘pinning’ during options expiration? The theory is that there is a Max Pain price where options sellers stand to lose the least, and that they manipulate prices towards these levels.” A search of the Social Science Research Network (SSRN) separately for “pinning” and… Keep Reading
February 15, 2011 - Individual Investing
Do emerging markets exchange-traded funds (ETF) reliably track and on average achieve the returns of benchmark indexes? In their February 2011 paper entitled “Evaluating the Performance of Global Emerging Markets Equity Exchange-Traded Funds”, David Blitz and Joop Huij examine the performances of emerging markets ETFs comprised of country markets such as South Korea, China, India,… Keep Reading
February 11, 2011 - Fundamental Valuation, Momentum Investing, Value Premium
Can financial statement analysis expose stocks that investors incorrectly view as value or growth (glamor)? In their February 2011 paper entitled “Identifying Expectation Errors in Value/Glamour Strategies: A Fundamental Analysis Approach”, Joseph Piotroski and Eric So investigate stock misvaluation by contrasting firm performance expectations implied by value/growth classification with a simple financial statement metric that… Keep Reading
February 10, 2011 - Calendar Effects
…evidence from simple tests on recent data offers little support for belief in day-of-the-week anomalies in broad stock market returns.
February 9, 2011 - Strategic Allocation, Volatility Effects
Does combining avoidance of fat tail losses with a traditional portfolio optimization strategy enhance performance? In her January 2011 paper entitled “The Economic Value of Controlling for Large Losses in Portfolio Selection”, Alexandra Dias investigates the effectiveness of combining tail loss risk management with minimum variance efficiency. This approach essentially seeks to add avoidance of… Keep Reading