Investing Research Articles

Do short sellers who publicly attack their targets affect stock prices? How do they choose their targets? In his October 2016 paper entitled “Activist Short-Selling”, Wuyang Zhao studies short sellers who publish adverse research on and/or publicly disparage the stocks they short. To assess unique effects of the negative publicity on targeted stock prices, he compares performances of targeted… Keep Reading

What is the single best performance metric an investor can use to rank performances of competing portfolios (such as mutual funds)? In his September 2016 paper entitled “Measuring Portfolio Performance: Sharpe, Alpha, or the Geometric Mean?”, Moshe Levy compares Sharpe ratio, 5-factor (market, size, book-to-market, profitability, investment) alpha and geometric mean return as portfolio performance metric. The… Keep Reading

Do the realities of trading (bids and asks, stale prices, large orders, noise traders and technical traders) that may drive asset price away from fundamental value affect some stocks more than others? If so, is the effect exploitable? In their October 2016 draft paper entitled “(Priced) Frictions”, Kewei Hou, Sehoon Kim and Ingrid Werner assess the impact of… Keep Reading

Do both asset-level and portfolio-level risk management techniques enhance portfolio performance? In the October 2015 version of his paper entitled “Optimal Dynamic Portfolio Risk Management”, Valeriy Zakamulin investigates risk management across assets (relative weighting of risky assets) and risk management over time (timing the market via positions in the risk-free rate/leverage). For risk management across risky assets, he consider equal weighting,… Keep Reading

What is the best way to harvest asset mispricings derived from aggregate overreaction/underreaction by naive investors? In his July 2014 presentation package entitled “Betting On ‘Dumb Volatility’ with ‘Smart Beta’”, Claude Erb examines strategies for exploiting the “dumb volatility” arguably generated by naive investors who buy high and sell low, temporarily driving prices materially above and below fair values. These… Keep Reading

Is there a way to predict when beta anomaly arbitrage (long low-beta stocks and short high-beta stocks will work? In the August 2015 version of their paper entitled “The Booms and Busts of Beta Arbitrage”, Shiyang Huang, Dong Lou and Christopher Polk investigate the power of a metric that measures beta arbitrage activity to predict associated returns. They… Keep Reading

What is the best scheme over the long run for identifying U.S. stock market trends? In the May 2015 version of his paper entitled “Market Timing With a Robust Moving Average”, Valeriy Zakamulin isolates the most robust moving average weighting scheme for a U.S. stock market index based on monthly data. He tests 300 weighting schemes. For all schemes, test portfolios are… Keep Reading

Can investors exploit stock repurchase and issuance activity to predict market reaction to the next firm earnings release? In the May 2015 version of their paper entitled “Are Earnings Predictable?”, Shahram Amini and Vijay Singal test whether firm executives take advantage of superior information to time repurchases (issuances) of stock just before unexpectedly good (bad) earnings… Keep Reading

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… Keep Reading

Is there an exploitable interaction between a stock’s market capitalization and its price? In their February 2015 paper entitled “Nominal Prices Matter”, Vijay Singal and Jitendra Tayal examine the relationship between stock prices and returns after: (1) controlling for market capitalization (size); (2) isolating the month of January; and, (3) excluding very small stocks. They each year perform double-sorts… Keep Reading