Investing Research Articles

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Momentum Strategy, Value Strategy and Trading Calendar Updates

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

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


Weekly Summary of Research Findings: 5/26/15 – 5/29/15

Below is a weekly summary of our research findings for 5/26/15 through 5/29/15. 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

Preliminary Momentum Strategy Strategy Updates

The home page and “Momentum Strategy” now show preliminary asset class momentum strategy positions for June 2015. The difference in past returns between the third and fourth places is very small, and they may change order by the close.

Simple Asset Class Leveraged ETF Momentum Strategy

Subscribers have asked whether substituting leveraged exchange-traded funds (ETF) in the “Simple Asset Class ETF Momentum Strategy” might enhance performance. To investigate, we execute the strategy with the following eight 2X leveraged ETFs, plus cash:

ProShares Ultra DJ-UBS Commodity (UCD)
ProShares Ultra MSCI Emerging Markets (EET)
ProShares Ultra MSCI EAFE (EFO)
ProShares Ultra Gold (UGL)
ProShares Ultra S&P500 (SSO)
ProShares Ultra Russell 2000 (UWM)
ProShares Ultra Real Estate (URE)
ProShares Ultra 20+ Year Treasury (UBT)
3-month Treasury bills (Cash)

We allocate all funds at the end of each month to the asset class leveraged ETF or cash with the highest total return over the past five months (5-1). Using monthly adjusted closing prices for the specified ETFs and the yield for Cash over the period January 2010 (the earliest month prices for all eight ETFs are available) through Apriol 2014 (only 64 months), we find that: Keep Reading

Trend Indicator Similarities

What is the best way to do asset price trend analysis? Two recent papers address this question. In the May 2015 version of their paper entitled “Which Trend is Your Friend?”, Ari Levine and Lasse Pedersen compare time series (intrinsic or absolute) momentum, moving average (fast and slow) crossovers and other trend indicators to determine the best way to identify a price trend. In the May 2015 version of their paper entitled “Uncovering Trend Rules”, Paul Beekhuizen and  Winfried Hallerbach describe how to determine the underlying historical weighting schemes (a combination of continuation and reversion) of price moving averages and combinations of price moving averages. Using both theoretical analyses and examples, these papers conclude that: Keep Reading

Lumber-Gold Interaction as Stocks and Bonds Indicator

Does the interaction of paradigmatic indicators of optimism (lumber demand) and pessimism (gold demand) tell investors when to take risk and when to avoid risk? In their May 2015 paper entitled “Lumber: Worth Its Weight in Gold: Offense and Defense in Active Portfolio Management”, Charles Bilello and Michael Gayed examine the recent relative performance of lumber (a proxy for economic activity via construction) and gold (a safe haven) as an indicator of future stock market and bond market performance. Specifically, if lumber futures outperform (underperform) spot gold over the prior 13 weeks, they go on offense (defense) the next week. They test this strategy on combinations of seven indexes comprising a spectrum of risk (listed lowest to highest): BofA Merrill Lynch 5-7 Year Treasury Index (Treasuries); CBOE S&P 500 Buy-Write Index (BuyWrite); S&P 500 Low Volatility Index (Low Volatility); S&P 500 Index (SP500); Russell 2000 Index (R2000); Morgan Stanley Cyclicals Index (Cyclicals); and, S&P 500 High Beta Index (High Beta). Using weekly nearest futures contract prices for random length lumber, weekly spot gold prices and weekly total returns for the seven test indexes during November 1986 (November 1990 for Low Volatility and High Beta) through January 2015, they find that: Keep Reading

Enhanced Value Strategies for U.S. Stocks

What is the best way to implement a value strategy for U.S. stocks? In their May 2015 paper entitled “Optimizing Value”, Ran Leshem, Lisa Goldberg and Alan Cummings investigate how the choice of value metric and implementation approach affect value strategy performance. They first compare book value-to-price ratio (B/P) and earnings-to-price ratio (E/P) based on returns for portfolios of the top 30% of stocks based on each metric, reformed frictionlessly each month since 1951. They then compare practical implementations that reform portfolios of S&P 500 stocks quarterly since 1973 (with round-trip trading friction 0.12%) by: (1) selecting the top 30% stocks based on the value metrics; or, (2) tilting S&P 500 Index weights based on the metrics. Finally, they add constraints to avoid value portfolio sector concentrations. Using Ken French’s value factor data since 1951 and data for S&P 500 stocks since 1973, both through December 2013, they find that: Keep Reading

Weekly Summary of Research Findings: 5/18/15 – 5/22/15

Below is a weekly summary of our research findings for 5/18/15 through 5/22/15. 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

Inflation Forecast Update

The Inflation Forecast now incorporates actual total and core Consumer Price Index (CPI) data for April 2015. The actual total (core) inflation rate for April is about the same as (a little higher than) forecasted.

Tilting or Indexing, Fundamentally?

Are there gradual steps toward a fundamental stock index that work just as well? In their April 2015 draft paper entitled “Decomposing Fundamental Indexation”, Gregg Fisher, Ronnie Shah and Sheridan Titman compare fundamental indexing strategies to strategies that tilt a market index toward high fundamental-to-price stocks. Fundamental indexing strategies weight stocks by firm fundamentals instead of market capitalizations, ignoring any information in stock prices. The tilt strategies adjust market weights with multipliers linearly scaled to fundamental-to-price ratios across a universe of stocks. Reflecting extreme fundamentals ratios for smaller stocks, the range of multipliers for stocks in the upper (lower) half of market capitalizations is 0 to 2 (0 to 4). After applying multipliers, tilt the strategies normalize weights so that they sum to 100%. Rebalancing for all portfolios is annual on the last day in April, incorporating a minimum four-month lag between the end of the financial reporting period and portfolio formation. Using data for a broad sample of U.S. common stocks during May 1975 through December 2014, they find that: Keep Reading

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Current Momentum Winners

ETF Momentum Signal
for June 2015 (Final)

Winner ETF

Second Place ETF

Third Place ETF

Gross Compound Annual Growth Rates
(Since August 2006)
Top 1 ETF Top 2 ETFs
14.3% 14.6%
Top 3 ETFs SPY
14.4% 7.8%
Strategy Overview
Current Value Allocations

ETF Value Signal
for 2nd Quarter 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
13.7% 9.6% 8.6%
Strategy Overview
Recent Research
Popular Posts
Popular Subscriber-Only Posts