Investing Research Articles

Is equity factor investing a straightforward path to premium capture and diversification? In their October 2014 paper entitled “Facts and Fantasies About Factor Investing”, Zelia Cazalet and Thierry Roncalli summarize the body of research on factor investing and provide examples to address the following questions: What is a risk factor? Do all risk factors offer attractive premiums? How stable and robust are these… Keep Reading

How serious is the snooping bias (p-hacking) derived from brute force mining of stock trading strategy variations? In their August 2017 paper entitled “p-Hacking: Evidence from Two Million Trading Strategies”, Tarun Chordia, Amit Goyal and Alessio Saretto test a large number of hypothetical trading strategies to estimate an upper bound on the seriousness of p-hacking and to estimate the… Keep Reading

Is model complexity (large number of parameters) more an analytical benefit in predicting asset returns, or more an avenue to discover in-sample luck? In their March 2023 paper entitled “Complexity in Factor Pricing Models”, Antoine Didisheim, Shikun Ke, Bryan Kelly and Semyon Malamud examine the theoretical relationship between input complexity and output accuracy for machine… Keep Reading

Is optimal stock anomaly exploitation long-only or long-short? If not long-short, does shorting the market rather than individual stocks work as well as shorting individual stocks? In his November 2017 paper entitled “How Do Short Selling Costs and Restrictions Affect the Profitability of Stock Anomalies?”, Filip Bekjarovski explores effects of short selling costs and constraints on… Keep Reading

Do individual stocks react differently and persistently to aggregate investor mood changes? In their December 2016 paper entitled “Mood Beta and Seasonalities in Stock Returns”, David Hirshleifer, Danling Jiang and Yuting Meng investigate whether some stocks have higher sensitivities to investor mood changes (higher mood betas) than others, thereby inducing calendar effects in the cross-section of returns…. Keep Reading

Do stock return momentum and reversal strategies work better when focused on certain intraday intervals rather than close-to-close, according to whether trades are primarily exploiting information or supplying liquidity? In his April 2017 paper entitled “Reversal, Momentum and Intraday Returns”, Haoyu Xu examines intraday versions of momentum and reversal anomalies, with focus on the first two… Keep Reading

Which equity factors have high and low expected returns? In their February 2017 paper entitled “Forecasting Factor and Smart Beta Returns (Hint: History Is Worse than Useless)”, Robert Arnott, Noah Beck and Vitali Kalesnik evaluate attractiveness of eight widely used stock factors. They measure alpha for each factor conventionally via a portfolio that is long (short)… Keep Reading

How efficiently do mutual funds capture factor premiums? In their April 2017 paper entitled “The Incredible Shrinking Factor Return”, Robert Arnott, Vitali Kalesnik and Lillian Wu investigate whether factor tilts employed by mutual fund managers deliver the alpha found in empirical research. They focus on four factors most widely used by mutual fund managers: market, size, value and momentum…. Keep Reading

How reliable and variable are the most widely accepted long-short factor premiums across asset classes? Can investors time factor premium? In their June 2019 paper entitled “Factor Premia and Factor Timing: A Century of Evidence”, Antti Ilmanen, Ronen Israel, Tobias Moskowitz, Ashwin Thapar and Franklin Wang examine multi-class robustness of and variation in four prominent… Keep Reading

Is outperformance of green (environmentally friendly) stocks relative to brown (not environmentally friendly) stocks due to firm performance or concern about the climate? In other words, do green stocks carry a climate concern premium? In their June 2021 paper entitled “Dissecting Green Returns”, Lubos Pastor, Robert Stambaugh and Lucian Taylor examine relative performance of green… Keep Reading