Should investors trust retirement planning tools that are publicly available on financial websites? In their February 2016 paper entitled “The Efficacy of Publicly-Available Retirement Planning Tools”, Taft Dorman, Barry Mulholland, Qianwen Bi and Harold Evensky: Identify via theoretical...
How should investors assess the risk of financial advisor misconduct? In their March 2016 paper entitled “The Market for Financial Adviser Misconduct”, Mark Egan, Gregor Matvos and Amit Seru investigate the recent extent of misconduct among registered financial...
Can individual investors easily mimic the asset allocation strategies, and thereby the returns, of university endowments? In his March 2016 paper entitled “Invest Like an Endowment”, Drew Knowles reviews the asset allocation policies and resultant investment returns...
What happens out-of-sample to stock portfolios with weights derived from extreme in-sample fitting? In their February 2016 paper entitled “Stock Portfolio Design and Backtest Overfitting”, David Bailey, Jonathan Borwein and Marcos Lopez de Prado examine backtest overfitting in...
Is Robert Shiller’s cyclically adjusted price-to-earnings ratio (CAPE or P/E10) a better predictor of long-term stock market performance than other valuation ratios? In his January 2016 paper entitled “Predicting Stock Market Returns Using the Shiller CAPE — An...
How can investors easily estimate the degradation from optimized in-sample Sharpe ratio to out-of-sample expected Sharpe ratio? In their February 2016 paper entitled “Noise Fit, Estimation Error and a Sharpe Information Criterion”, Dirk Paulsen and Jakob Sohl derive a...
A subscriber suggested evaluating Sentdex Sentiment Trading Signals. These signals attempt to derive the emotion of a current body of text (over 20 sources, mainly Reuters, Bloomberg, WSJ, LA Times, CNBC, Forbes, Business Insider and Yahoo Finance)...
How well do mutual funds and exchange-traded funds (ETF) designed to track hedge fund indexes work? In their October 2015 paper entitled “Synthetic Hedge Funds”, Mario Fischer, Matthias Hanauer and Robert Heigermoser examine the performance of synthetic hedge funds,...
“Pervasiveness and Robustness of SMA Effectiveness for Stocks” summarizes research finding that long-term simple moving averages (SMA) pervasively outperform a buy-and-hold approach for U.S. stocks and stock portfolios during 1960-2011 and for seven developed stock...
Is systematic selling of equity index put or call options an attractive strategy? In their December 2015 paper entitled “Index Options Realized Returns Distributions from Passive Investment Strategies”, Jose Dapena and Julian Siri analyze equity index...
What kinds of smart beta work best? In their January 2016 paper entitled “A Taxonomy of Beta Based on Investment Outcomes”, Sanne De Boer, Michael LaBella and Sarah Reifsteck compare and contrast smart beta (simple, transparent, rules-based) strategies via backtesting of...
How easy is overfitting of investment strategy parameters and how much does overfitting inflate expectations? In their February 2016 paper entitled “Backtest Overfitting in Financial Markets”, David Bailey, Jonathan Borwein, Marcos Lopez de Prado, Amir Salehipour and Qiji...
Are high-yield government bonds good bets? In his January 2016 paper entitled “Finding Yield in A 2% World”, Mebane Faber applies a simple value metric to global government bonds. He specifies a value portfolio as the equally weighted third (Top 33%)...
Is selecting mutual funds based on strong performance over the last three years helpful (discovering fund manager skill) or harmful (signaling imminent fund strategy mean reversion)? In the February 2016 version of their paper entitled “The Harm in Selecting...
Each year, Forbes calculates the performance of columnist recommendations assuming: (1) equal initial investments in each stock pick when published; (2) 1% trading friction for each purchase; and, (3) matching benchmark investments in the S&P...
Is outperformance of low-volatility stocks just a manifestation of the value premium (outperformance of stocks with high book-to-market ratios compared to stocks with low book-to-market ratios)? In his February 2016 paper entitled “The Value of...
Financial market commentators and media sometimes cite the Economic Cycle Research Institute’s (ECRI) U.S. Weekly Leading Index (WLI) as an important economic indicator, implying that it is predictive of future stock market performance. According to ECRI,...
Can small (unconnected) investors compete in trades on economic news? In the February 2016 draft of her paper entitled “Is Someone Front-Running You Around News Releases?”, Irene Aldridge examines U.S. stock price, volatility and trading activity...
Do alternative beta (factor-weighted) stock indexes present an exploitable advantage over traditional market capitalization weighting? In their February 2016 paper entitled “Alternative Beta Strategies”, Frank Benham, Roberto Obregon, Edmund Walsh and Timur Yontar analyze performance and practicality aspects of alternative beta stock indexes that...
What are the best ways to buy or sell tail risk protection (crash insurance)? In his May 2015 paper entitled “Should You Buy or Sell Tail Risk Hedges? A Filtered Bootstrap Approach”, Lorenzo Baldassini uses filtered bootstrap...
Do reversal, momentum and reversion effects hold among German stocks? In his January 2016 paper entitled “Trading Strategies Based on Past Returns – Evidence from Germany”, Martin Schmidt examines the performance of short-term reversal, intermediate-term momentum, long-term...
Do the 12 yearly signs of the Chinese Zodiac cycle (Rabbit, Dragon, Snake, Horse, Goat, Monkey, Rooster, Dog, Pig, Rat, Ox, Tiger) relate individually to stock market behavior? In their January 2016 paper entitled “The...
Does a time series (absolute or intrinsic) momentum strategy work at the stock level? In their January 2016 paper entitled “The Enduring Effect of Time-Series Momentum on Stock Returns Over Nearly 100-Years” Ian D’Souza, Voraphat Srichanachaitrchok, George Wang...
Has the Moore’s Law-driven advance in financial information technology strengthened the hand of Murphy’s Law in markets? In the January 2016 version of his paper entitled “Moore’s Law vs. Murphy’s Law in the Financial System: Who’s...
How do gold futures and gold miner stocks interact? In their January 2016 paper entitled “Are Gold Bugs Coherent?”, Brian Lucey and Fergal O’Connor examine the relationship between gold miner stock behavior (NYSE ARCA Gold Bugs Index) and...