Investing Research Articles

Are some stocks more sensitive to commodity prices than others? If so, is the variation exploitable? In their February 2011 paper entitled “The Stock Market Price of Commodity Risk”, Martijn Boons, Frans de Roon and Marta Szymanowska investigate the cross-sectional variation in stock returns associated with commodity price changes by calculating betas for individual stocks… Keep Reading

…a five-factor model effectively explains differences among individual stock returns, with volatility of past returns at least as important as size, value and momentum factors.

Is there a better stock value ratio than commonly used ones such as book-to-market, dividend-to-price, earnings-to-price and cash flow-to-price ratios? In the January 2020 revision of his paper entitled “A New Value Strategy”, Baolian Wang investigates the effectiveness of cash-based operating profitability-to-price (COP/P) as a value ratio. He computes COP as operating profitability minus accruals,… Keep Reading

Below is a weekly summary of our research findings for 12/3/18 through 12/7/18. 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.

What drives 12-month (with skip-month) momentum and 1-month reversal effects among U.S. common stock returns?  In their July 2021 paper entitled “Mapping out Momentum”, Yimou Li and David Turkington decompose momentum and reversal effects into distinct industry/sector, factor (size, value, profitability, investment) and stock-specific contributions. In addition to full-sample results, they look at: High and… Keep Reading

Intangible assets derive largely from investments in employees, brand and knowledge that are expensed rather than booked. Despite large and growing importance of intangible assets, traditional measures of firm value ignore them. Are firm value assessments therefore defective? In their October 2020 paper entitled “Intangible Value”, Andrea Eisfeldt, Edward Kim and Dimitris Papanikolaou evaluate a… Keep Reading

Do returns for “smart beta” indexes, constructed to exploit research on one or more factors that predict individual stock returns, reliably predict returns for exchange-traded funds (ETF) introduced to track them? In the June 2020 version of their preliminary paper entitled “The Smart Beta Mirage”, Shiyang Huang, Yang Song and Hong Xiang compare returns of… Keep Reading

Do stock anomaly (factor premium) portfolios exhibit exploitable value and momentum? In their February 2020 paper entitled “Value and Momentum in Anomalies”, Deniz Anginer, Sugata Ray, Nejat Seyhun and Luqi Xu investigate exploitability of time variation in the predictive ability of 13 published U.S. stock accounting and price-based anomalies based on: (1) anomaly momentum (1-month… Keep Reading

Which economic variables are most important for predicting stock returns? In their October 2018 paper entitled “Sparse Macro Factors”, David Rapach and Guofu Zhou apply machine learning to isolate via sparse principal component analysis (PCA) which of 120 economic variables from the FRED-MD database most influence stocks. These variables span output/income, labor market, housing, consumption, orders/inventories, money/credit, yields/exchange rates… Keep Reading

Does focusing on downside risk (volatility or beta) consistently produce more accurate forecasts of asset returns? In their July 2018 paper entitled “Tail Risk in the Cross Section of Alternative Risk Premium Strategies”, Bernd Scherer and Nick Baltas investigate how well downside risk explains cross-sectional returns of 260 risk factor strategies spanning asset classes and investment styles… Keep Reading