Investing Research Articles

Information technology has lowered barriers for creating/operating financial asset exchanges (venues for matching supply and demand). Proliferation of low-cost venues elevates competition for investor dollars and tends to depress transaction fees. Automated, broadened supply/demand matching tends to depress bid-ask spreads. This evolving market ecology attracts high-frequency traders (HFT), enabled by new technology to exploit short-term… Keep Reading

Does the U.S. stock market exhibit predictable return and volatility patterns during the trading day? To investigate, we analyze one-minute prices for SPDR S&P 500 (SPY) over two recent years. Specifically, we calculate average cumulative return, average returns for 15-minute intervals and average standard deviation of one-minute returns during 15-minute intervals over the trading day during… Keep Reading

Do calendar effects found in stock markets also appear in broad stock index futures? In their November 2011 paper entitled “Calendar Anomalies in Stock Index Futures”, Oscar Carchano and Angel Pardo investigate 188 possible cyclical anomalies in S&P 500, DAX and Nikkei index futures contracts (derived from day-of-the-week, month-of-the-year, weekday-of-the-month, week-of-the-month, semi-month, turn-of-the-month, end-of-year, holidays, semi-month-of-the-year,… Keep Reading

Is there a more precise way to measure the premium available to investors willing to bear volatility risk than overall return variance? In their January 2015 paper entitled “Downside Variance Risk Premium”, Bruno Feunou, Mohammad Jahan-Parvar and Cedric Okou investigate the usefulness of  (1) decomposing the variance risk premium (the difference between option-implied and realized variance)… Keep Reading

Do individual investors exhibit good or bad timing in stock transactions of recent years? In the August 2015 version of their paper entitled “Fool’s Mate: What Does CHESS [Clearing House Electronic Subregister System] Tell Us About Individual Investor Trading Performance?”, Reza Bradrania, Andrew Grant, Joakim Westerholm and Wei Wu examine the short-term performance of stocks with unusual buying or selling… Keep Reading

Does “meaningful” short-term stock return momentum predict exploitable short-term price trends? In their October 2015 paper entitled “News Momentum”, Hao Jiang, Sophia Li  and Hao Wang combine time-stamped firm news with high-frequency (15-minute) stock returns to identify stocks exhibiting news-driven momentum. Their news feed is the stream of unique items (no repeated stories) delivered in near real time by RavenPack. News-driven momentum derives from high-frequency returns… Keep Reading

Are moody investors prone to avoid risk on Monday and accept it on Friday? In his January 2016 paper entitled “Day of the Week and the Cross-Section of Returns”, Justin Birru examines how long-short U.S. stock anomaly portfolio returns vary by day of the week. His hypothesis is that pessimistic (optimistic) mood on Monday (Friday) leads to… Keep Reading

Does the S&P 500 implied volatility index (VIX) exhibit reliable intraday and day-of-week patterns? In their December 2016 paper entitled “The Intraday Properties of the VIX and the VXO”, Adrian Fernandez-Perez, Bart Frijns, Alireza Tourani-Rad and Robert Webb investigate daily and intraday properties of VIX and its predecessor, the S&P 100 implied volatility index (VXO). VIX maintains constant… Keep Reading

Is there an exploitable way to predict when short-term stock market return will be negative? In his June 2018 paper entitled “Predictable Downturns”, Carter Davis tests a random forest regression-based forecasting model to predict next-day U.S. stock market downturns. He uses the value-weighted return of a portfolio of the 10 U.S. stocks with the largest market… Keep Reading

Do stock dividends exhibit exploitable risk premiums? In their July 2018 paper entitled “A Model-Free Term Structure of U.S. Dividend Premiums”, Maxim Ulrich, Stephan Florig and Christian Wuchte construct a term structure of the dividend risk premium and test strategies to time this premium at specific horizons. They specify dividend risk premium as the spread between: Expected dividend growth… Keep Reading