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Latest Market Research Articles

Weekly Summary of Research Findings: 9/28/15 – 10/2/15

Below is a weekly summary of our research findings for 9/28/15 through 10/2/15. These summaries give you a quick snapshot of our content the past week so that you can quickly decide what’s relevant to your investing needs.

Subscribers: To receive these weekly digests via email, click here to sign up for our mailing list. Keep Reading

Annual Stock Market Streaks

Are annual stock market winning and losing streaks informative about future market performance? To investigate, we consider up and down annual streaks for the Dow Jones Industrial Average (DJIA). We look at streaks in two ways:

  1. Retrospective (non-overlapping). We know the total duration of each streak.
  2. Experienced (real-time and partially overlapping). We know each year how long a streak has lasted, but we don’t know when it will end.

Using DJIA annual returns for 1929 through 2014 (86 years), we find that: Keep Reading

Value Strategy Update

We have updated the the monthly asset class ETF value strategy weights and associated performance data at Value Strategy.

Preliminary Value Strategy Update

The home page and “Value Strategy” now show preliminary asset class ETF value strategy positions for October 2015. There may be small shifts in allocations based on final data, but the “Best Value” selection is unlikely to change.

Consumer Credit and Stock Returns

Does expansion (contraction) of consumer credit indicate growing (shrinking) corporate sales, earnings and ultimately stock prices? The Federal Reserve collects and publishes U.S. consumer credit data on a monthly basis with a delay of about five weeks. Using monthly seasonally adjusted total U.S. consumer credit for January 1943 through July 2015 and monthly Dow Jones Industrial Average (DJIA) closes for January 1943 through August 2015 (871-872 months), we find that: Keep Reading

Momentum Strategy and Trading Calendar Updates

We have updated the the monthly asset class ETF momentum winners and associated performance data at Momentum Strategy.

We have updated the Trading Calendar to incorporate data for September 2015.

Preliminary Momentum Strategy Update

The home page and “Momentum Strategy” now show preliminary asset class ETF momentum strategy positions for October 2015. The difference in past returns between third and fourth places is large, so the top three are very unlikely to change by the close.

Risk-averse investors following the strategy may want to consider the findings in “SACEMS with Three Copies of Cash”.

A Few Notes on Systematic Trading

Robert Carver introduces his 2015 book, Systematic Trading: A Unique New Method for Designing Trading and Investing Systems, by stating that: “I don’t believe there is any magic system that will automatically make you huge profits, and you should be wary of anyone who says otherwise, especially if they want to sell it to you. Instead, success in systematic trading is mostly down to avoiding common mistakes such as over complicating your system, being too optimistic about likely returns, taking excessive risks, and trading too often. I will help you avoid these errors. This won’t guarantee returns, but it will make failure less likely. My framework…can be adapted to meet your needs. …Each element of the framework has been carefully designed… I’ll explain the available options, which I prefer, and why.” Based on his experience as a trader/portfolio manager and specific research, he concludes that: Keep Reading

Continue to archive for older articles

Editor Archive Picks

Stocks versus Bonds as Investment Horizon Lengthens

Should investors believe in the superiority of stocks for the long run and bonds for the short run? In his December 2011 paper entitled “Stocks, Bonds, Risk, and the Holding Period: An International Perspective”, Javier Estrada examines how the absolute and relative risks of stocks and bonds evolve as investment horizon grows (time diversification). Considering both annual and cumulative returns and various measures of variability/ri…

Optimal Asset Class Allocations

…n Lam explore which asset classes add mean-variance diversification value to a traditional portfolio of stocks, bonds and cash and determine the weights of asset classes in optimal portfolios (maximum Sharpe ratio). Their total set of ten asset classes consists of stocks, government bonds, cash, private equity, real estate, hedge funds, commodities, high yield bonds, credits and inflation-linked bonds. Using mostly U.S. data as available for hist…

Four-factor Model of Corporate Bond Returns

Do factor models predict returns for corporate bonds as they do for stocks? In their October 2014 paper entitled “Factor Investing in the Corporate Bond Market”, Patrick Houweling and Jeroen van Zundert develop and test a four-factor (size, low-risk, value and momentum) model of future corporate bond returns. Each month for investment grade and high yield bond market segments separately, they construct an equally-weighted long-only p…

Triumph of the Optimists (Chapter-by-Chapter Review)

…the organization of the book. Key points are that the work: Examines returns from and volatilities of equities, bonds and bills, also addressing inflation rates and currency shifts. Covers 16 countries comprising over 88% of current world market capitalization, offering context for increasing global economic integration. Assembles and organizes data across these markets for 101 years of history, from 1900 to 2000. Provides detailed analyses of im…

Dependence of Optimal Allocations on Investment Horizon

…Best, Charles Hodges and James Yoder explore the optimal (highest Sharpe ratio) mix of long-term U.S. corporate bonds and large-capitalization U.S. common stocks across investment horizons from one to 25 years. They test portfolios ranging from 100%-0% to 0%-100% stocks-bonds in 5% increments with annual rebalancing. They estimate annual returns for stocks and bonds based on 87 years of historical data. They simulate the portfolio return distribu…

Popular Articles
Current Momentum Winners

ETF Momentum Signal
for October 2015 (Final)

Winner ETF

Second Place ETF

Third Place ETF

Gross Compound Annual Growth Rates
(Since August 2006)
Top 1 ETF Top 2 ETFs
12.3% 12.6%
Top 3 ETFs SPY
12.7% 6.5%
Strategy Overview
Current Value Allocations

ETF Value Signal
for October 2015 (Final)





The asset with the highest allocation is the holding of the Best Value strategy.
Gross Compound Annual Growth Rates
(Since September 2002)
Best Value Weighted 60-40
12.1% 9.6% 7.6%
Strategy Overview
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