Investing Research Articles

Do low-volatility strategies work for all stocks? In their April 2015 paper entitled “Low Risk Anomalies?”, Paul Schneider, Christian Wagner and Josef Zechner examine relationships between low-beta/low-volatility stock anomalies and implied stock return skewness. They compute ex-ante (implied) skewness for each stock via a portfolio of associated options that is long (short) out-of-the-money calls (puts). The more investors are… Keep Reading

What conditions foretell stock momentum strategy crashes? In their October 2014 paper entitled “Momentum Trading, Return Chasing, and Predictable Crashes”, Benjamin Chabot, Eric Ghysels and Ravi Jagannathan examine stock momentum strategy performance for both widely used historical U.S. data (starting in 1926 through 2012) and for a hand-collected sample of stocks listed on the London Stock Exchange during 1866 to… Keep Reading

How do commodity futures behave in the post-financialization era, with commodities easily accessible via exchange-traded instruments and futures? In their September 2014 paper entitled “Factor Structure in Commodity Futures Return and Volatility”, Peter Christoffersen, Asger Lunde and Kasper Olesen analyze commodity return and volatility dynamics since financialization (after deregulation of commodity markets in the early 2000s). They consider 15 contract series… Keep Reading

Are alternative mutual funds attractive for retail investors as hedge fund surrogates? In their June 2014 paper entitled “Performance of Alternative Mutual Funds: The Average Investors Hedge Fund”, Srinidhi Kanuri and Robert McLeod analyze the performance of alternative mutual funds that employ strategies similar to those of hedge funds and seek returns uncorrelated with the equity market. These funds can… Keep Reading

Is past performance a useful indicator of future performance for some kinds of mutual funds? In their April 2014 paper entitled “Differences in Short-Term Performance Persistence by Mutual Fund Equity Class”, Larry Detzel and Andrew Detzel evaluate performance persistence among diversified U.S. equity mutual funds categorized per the Morningstar Equity Style Box: Large Value (LV), Large Blend (LB), Large… Keep Reading

Do U.S. stock return anomalies exhibit exploitable momentum? In their December 2016 paper entitled “Scaling Up Market Anomalies”, Doron Avramov, Si Cheng, Amnon Schreiber and Koby Shemer test momentum across stock return anomalies. Their investment universe consists of the long and short sides of 15 stock portfolios, each long (short) the top (bottom) tenth of stocks based on sorting by one of… Keep Reading

What are the essential points from the stream of research on low-volatility investing? In their August 2019 paper entitled “The Volatility Effect Revisited”, David Blitz, Pim van Vliet and Guido Baltussen provide an overview of the low-volatility (or as they prefer, low-risk) effect, the empirical finding in stock markets worldwide and within other asset classes… Keep Reading

Are there equity styles that tend to perform relatively well during and after stock market crashes? In their April 2020 paper entitled “Equity Styles and the Spanish Flu”, Guido Baltussen and Pim van Vliet examine equity style returns around the Spanish Flu pandemic of 1918-1919 and five earlier deep U.S. stock market corrections (-20% to… Keep Reading

Do investors systematically and exploitably underreact to deviations in firm fundamentals from recent averages? In their January 2020 paper entitled “Anchoring on Past Fundamentals”, Doron Avramov, Guy Kaplanski and Avanidhar Subrahmanyam investigate how deviations of quarterly firm accounting variables from averages over recent quarters relate to future returns across stocks. They first construct a stock… Keep Reading

Is the conventional linear factor model comprised of a few presumably independent predictors the best, or even a good, way to model differences in returns across assets? In the December 2019 update of their paper entitled “The Cross-Section of Returns: A Non-Parametric Approach”, Enoch Cheng and Clemens Struck compare predictive powers of conventional linear models… Keep Reading