Objective research to aid investing decisions

Value Investing Strategy (Strategy Overview)

Allocations for July 2020 (Final)

Momentum Investing Strategy (Strategy Overview)

Allocations for July 2020 (Final)
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Recent Investing Research

Weekly Summary of Research Findings: 7/6/20 – 7/10/20

Below is a weekly summary of our research findings for 7/6/20 through 7/10/20. 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.

Retail Sales Growth and Stock Market Returns

Financial media each month report retail sales, the largest component of U.S. Gross Domestic Product, as a harbinger of stock market behavior. Do retail sales reliably predict U.S. stock market behavior? To investigate, we relate monthly change in retail sales to monthly S&P 500 Index return. We consider both seasonally adjusted (SA) and non-seasonally adjusted… Keep Reading

Representative Investor Returns on Stocks?

Most stock data sources present Total Return (TR), 100% reinvestment of dividends with no participation in firm rights issuances and share issuances/repurchases, as representative of investment performance. An alternative perspective is Total Return for All Shareholders (TRAS), the return for an investor who maintains a constant fraction of issued shares (see the table below). Can… Keep Reading

Interest Rates and the Equity Value Premium

Do interest rate effects explain/predict the poor performance of value stocks over the past decade, and especially during 2017 through early 2020? In their May 2020 paper entitled “Value and Interest Rates: Are Rates to Blame for Value’s Torments?”, Thomas Maloney and Tobias Moskowitz investigate interactions between equity value factors and the interest rate environment…. Keep Reading

Pervasive Effects of Preference for Lottery Stocks

Is investor attraction to high-reward/high-risk (lottery) stocks a crucial contributor to stock return anomalies? In their May 2020 paper entitled “Lottery Preference and Anomalies”, Lei Jiang, Quan Wen, Guofu Zhou and Yifeng Zhu aggregate 16 measures of lottery preference into a single long-short factor via time-varying linear combination. Examples of the 16 measures are: maximum… Keep Reading

Open Source Stock Predictor Data and Code

Are published studies that predict higher returns for some U.S. stocks and lower for others based on firm accounting, stock trading and other data reproducible? In their May 2020 paper entitled “Open Source Cross-Sectional Asset Pricing”, Andrew Chen and Tom Zimmermann make available data and code that reproduce many published cross-sectional stock return predictors, allowing… Keep Reading

Update of Findings for a Highly Influential Asset Allocation Paper

“A Quantitative Approach to Tactical Asset Allocation” is a highly influential paper (over 234,000 downloads from SSRN ) about asset allocation based on trend following, with the original version posted in early 2007 and a revision in early 2013. The strategy in that paper applies a 10-month simple moving average (SMA10) timing rule separately to… Keep Reading

COVID-19 Impacts on Stock Valuation

What are the roles of changes in earnings forecasts and the discount rate on stock valuation during the COVID-19 stock market crash? In the May 2020 update of their paper entitled “Earnings Expectations in the COVID Crisis”, Augustin Landier and David Thesmar investigate firm-level analyst earnings forecast revisions and discount rate changes as jointly reflected… Keep Reading

SACEMS, SACEVS and Trading Calendar Updates

We have updated monthly allocations and performance data for the Simple Asset Class ETF Momentum Strategy (SACEMS) and the Simple Asset Class ETF Value Strategy (SACEVS). We have also updated performance data for the Combined Value-Momentum Strategy. We have updated the Trading Calendar to incorporate data for June 2020.

Preliminary SACEMS and SACEVS Allocation Updates

The home page, Simple Asset Class ETF Momentum Strategy (SACEMS) and Simple Asset Class ETF Value Strategy (SACEVS) now show preliminary positions for July 2020. SACEMS rankings are unlikely to change by the close. SACEVS allocations are currently sensitive to yields and S&P 500 Index level, so they may shift a little by the close.

Demise of Multi-class Investing?

Does multi-class investing boost performance for sophisticated investors such as educational endowments? In his June 2020 paper entitled “Endowment Performance and the Demise of the Multi-Asset-Class Model”, Richard Ennis examines recent performance of educational endowment funds, with focus on allocations to alternative assets. Using performance data from a report on 774 university endowments and from… Keep Reading

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