Investing Research Articles

Does the Fama-French five-factor model of stock returns (employing market, size, book-to-market, investment and profitability factors) explain the outperformance of low-volatility stocks. In their July 2016 paper entitled “The Profitability of Low Volatility”, David Blitz and Milan Vidojevic examine whether: (1) any of several models expose a conventional return-for-risk market beta effect for stocks; and, (2) the low-volatility effect is… Keep Reading

How do value and momentum interact with each other and with size, economic and liquidity factors worldwide? In the November 2013 version of their paper entitled “Size, Value, and Momentum in Developed Country Equity Returns: Macroeconomic and Liquidity Exposures”, Nusret Cakici and Sinan Tan address this question for developed markets. They use long-short, factor-sorted portfolios to measure… Keep Reading

…fund investors should focus on funds with high “Active Shares” (holdings very different from their benchmark indexes), low assets under management and high last-year returns.

How well do different measures of stock quality perform as portfolio screens? In the May 2018 update of paper entitled “Does Earnings Growth Drive the Quality Premium?”, Georgi Kyosev, Matthias Hanauer, Joop Huij and Simon Lansdorp review commonly used quality definitions, test their respective powers to predict stock returns and analyze usefulness in constructing international stocks… Keep Reading

…Reading Minds and Markets offers an interesting perspective on what matters most in allocating funds to asset classes, but falls short of some other sources in terms of rigor and specificity.

…evidence from German stocks supports belief in the pervasiveness of a momentum effect and perhaps a value premium, but not market beta and size effects. Any sentiment effect is likely weak, specific to susceptible stocks and concentrated in intervals after very low sentiment.

Is there a reliable and exploitable cross-sectional relationship between beta and future returns? In the October 2010 draft of their paper entitled “Betting Against Beta”, Andrea Frazzini and Lasse Pedersen investigate exploitability of historical beta within U.S. equities and 19 other stock markets, across 20 global equity markets, and for Treasuries, corporate bonds and commodity… Keep Reading

“CFOs vs. CEOs as Inside Traders” describes research finding that, based on data from before the Sarbanes-Oxley Act (SOX), investors should assume that Chief Financial Officers (CFO) are better inside traders than Chief Executive Officers (CEO). Does this finding hold after SOX? In the August 2012 update of their paper entitled “CEOs, CFOs, and COOs: Why Are… Keep Reading

What drives the momentum effect among individual U.S. stocks? In their June 2012 paper entitled “Momentum, Risk, and Underreaction”, Mark Rachwalski and Quan Wen investigate the sources of profits for momentum strategies applied to individual stocks. They measure momentum profitability as average monthly returns to three series of equal-weighted hedge portfolios that each month are long… Keep Reading

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 Steiner applies principal component analysis to explore sources of the variability in the efficient frontier. He uses weekly data and… Keep Reading