A subscriber inquired about the TransDow trading strategy, which seeks to exploit a relationship between the Dow Jones Transportation Average (DJTA) and the Dow Jones Industrial Average (DJIA). Specifically, this strategy: Computes the 10-week simple...
Are high-grade diamonds competitive with conventional asset classes as investments? In his April 2013 paper entitled “The Returns on Investment Grade Diamonds”, Luc Renneboog examines secondary market returns and risks of investment grade gems (white...
Should traders discard boring, rather than exciting (outlier), data? In his February 2013 paper entitled “Filtered Market Statistics and Technical Trading Rules” (the National Association of Active Investment Managers’ 2013 Wagner Award third place winner), George Yang proposes to...
How can investors use exchange-traded products to exploit equity market volatility? In the April 2013 version of his paper entitled “Easy Volatility Investing” (the National Association of Active Investment Managers’ 2013 Wagner Award runner-up), Tony Cooper explores the rewards and risks...
Do equity sectors have exploitably measurable relative value? In his February 2013 paper entitled “Equity Sector Rotation via Credit Relative Value” (the National Association of Active Investment Managers’ 2013 Wagner Award winner), Dave Klein outlines a long-only strategy that...
What works better for currency trading, technical or fundamental analysis? In their April 2013 working paper entitled “Exchange Rate Expectations of Chartists and Fundamentalists”, Christian Dick and Lukas Menkhoff compare the behavior and performance of...
Is there a portfolio diversification approach that beats widely used mean-variance optimization and risk parity approaches? In their July 2011 paper entitled “Properties of the Most Diversified Portfolio”, Yves Choueifaty, Tristan Froidure and Julien Reynier...
Analyses in “Shorting VXX with Crash Protection” suggest that one-month momentum may be a useful signal for trading in and out of a short position in iPath S&P 500 VIX Short-Term Futures ETN (VXX). A subscriber...
How do “passive” stock indexes constructed from widely researched allocation rules fare against market capitalization weighting? In their March 2013 paper entitled “An Evaluation of Alternative Equity Indices – Part 1: Heuristic and Optimised Weighting...
How should investors view illiquid assets? In the January 2013 draft of his book chapter titled “Illiquid Asset Investing”, Andrew Ang summarizes the characteristics of investments in illiquid assets. Illiquid investments typically exhibit infrequent trading, small...
Why do optimal portfolios derived from Modern Portfolio Theory (MPT) often lose to simple equal-weight portfolios? In the March 2013 version of their paper entitled “Why Optimal Diversification Cannot Outperform Naive Diversification: Evidence from Tail Risk...
Is intrinsic (time series) momentum effective in managing risk across asset classes? In his April 2013 paper entitled “Absolute Momentum: a Simple Rule-Based Strategy and Universal Trend-Following Overlay”, Gary Antonacci examines an intrinsic (absolute or...
Should investors consider a broader framework to encompass trend-following/momentum investing strategies? In his March 2013 paper entitled “Asset Price Trend Theory: Reframing Portfolio Theory from the Ground Up”, Robert Dubois presents a portfolio allocation strategy that...
Is there a good short-cut for constructing a low-beta portfolio? In their March 2013 paper entitled “Country and Sector Drive Low-Volatility Investing in Global Equity Markets”, Sanne de Boer, Janet Campagna and James Norman investigate...
How do broker-employed stock analysts operate? In their March 2013 paper entitled “Inside the ‘Black Box’ of Sell-Side Financial Analysts”, Lawrence Brown, Andrew Call, Michael Clement and Nathan Sharp summarize the results of a survey...
Does the asset growth effect (growth is bad) exist in non-U.S. equity markets? In their July 2012 paper entitled “The Asset Growth Effect: Insights from International Equity Markets”, Akiko Watanabe, Yan Xu, Tong Yao and...
Do Piotroski’s FSCORE for value stocks and Mohanram’s GSCORE for growth stocks predict winners and losers for non-U.S. stocks? In their March 2013 paper entitled “Fundamental Based Market Strategies”, Angelo Aspris, Nigel Finch, Sean Foley and Zachary Meyer apply...
How do individuals perceive and position for Black Swans? In his March 2013 paper entitled “The Psychology of Tail Events: Progress and Challenges”, Nicholas Barberis employs a two-step framework to summarize recent research on the psychology of tail...
How stable is the mean-variance efficient frontier specified by Modern Portfolio Theory (MPT), and what drives changes to it? In his March 2013 paper entitled “Principal Component Analysis of Time Variations in the Mean-Variance Efficient Frontier”, Andreas...
What proportion of long-short equity hedge fund managers effectively time the stock market? In their January 2013 paper entitled “Hedge Fund Managers’ Market Timing Skills”, Xin Li and Hany Shawky investigate whether long-short equity hedge...
Andrew Abraham, founder of Abraham Investment Management, prefaces his 2013 book, The Bible of Compounding Money: The Complete Guide to Investing with World Class Money Managers, by stating: “I wrote this book because I wanted to separate...
Current price versus 10-month simple moving average (SMA) is a widely used indicator of asset and asset class trend, with current price above/below its 10-month SMA viewed as bullish/bearish. How has this indicator performed for...
Is downside risk the critical driver of investor asset valuation? In the January 2013 version of their paper entitled “Conditional Risk Premia in Currency Markets and Other Asset Classes”, Martin Lettau, Matteo Maggiori and Michael...
Do time series carry (intrinsic value) and time series momentum (intrinsic momentum) strategies work across asset classes? What drives their returns, and how do they interact? In the January 2013 very preliminary version of their paper entitled...
Wesley Gray (founder and executive managing member of Empiritrage LLC and Turnkey Analyst LLC) and Tobias Carlisle (founder and managing member of Eyquem Investment Management LLC) describe their 2013 book, Quantitative Value: A Practitioner’s Guide to Automating Intelligent Investment and Eliminating Behavioral Errors, as...