Investing Research Articles

Do mutual fund managers who employ technical analysis outperform those who do not? In their January 2013 paper entitled “Head and Shoulders above the Rest? The Performance of Institutional Portfolio Managers who Use Technical Analysis”, David Smith, Christophe Faugere and Ying Wang compare the aggregate investment performance of mutual funds that (self-reportedly) using technical analysis to… Keep Reading

Do trading rules based on price relative to intermediate-term and long-term simple moving averages (SMA) outperform a buy-and-hold approach for all kinds of stocks and stock portfolios? In the January 2013 update of his paper entitled “Market Timing with Moving Averages”, Paskalis Glabadanidis examines SMA performance based on monthly returns. He uses an SMA measurement… Keep Reading

Is there a way to predict when stock price momentum strategies will thrive or crash? In the October 2014 update of their draft paper entitled “Time-Varying Momentum Payoffs and Illiquidity”, Doron Avramov, Si Cheng and Allaudeen Hameed investigate the relationship between future momentum strategy profitability and market illiquidity. They measure momentum conventionally as the average gross monthly return… Keep Reading

What individual investment behaviors are worst? In their January 2014 paper entitled “Which Investment Behaviors Really Matter for Individual Investors?”, Joachim Weber, Steffen Meyer, Benjamin Loos and Andreas Hackethal investigate relationships between the following ten tendencies of individual investors and portfolio performance: Portfolio turnover: unprogrammed trading volume scaled by portfolio value. Trade clustering: clustering of investor… Keep Reading

Do some stocks react more strongly to economic uncertainty than others? In the March 2014 draft of their paper entitled “Cross-Sectional Dispersion in Economic Forecasts and Expected Stock Returns”, Turan Bali, Stephen Brown and Yi Tang examine the role of economic uncertainty in the pricing of individual stocks. They measure economic uncertainty as disagreement (dispersion)… Keep Reading

Are widely used volatility-adjusted investment performance metrics, such as Sharpe ratio, robust to different measurement intervals? In the July 2014 version of their paper entitled “The Divergence of High- and Low-Frequency Estimation: Implications for Performance Measurement”, William Kinlaw, Mark Kritzman and David Turkington examine the sensitivity of such metrics to the length of the return interval… Keep Reading

How can researchers account for the snooping bias derived from testing of multiple strategy alternatives on the same set of data? In the July 2014 version of their paper entitled “Evaluating Trading Strategies”, Campbell Harvey and Yan Liu describe tools that adjust strategy evaluation for multiple testing. They note that conventional thresholds for statistical significance assume an independent… Keep Reading

How much distortion can data snooping inject into expected investment strategy performance? In their October 2014 paper entitled “Statistical Overfitting and Backtest Performance”, David Bailey, Stephanie Ger, Marcos Lopez de Prado, Alexander Sim and Kesheng Wu note that powerful computers let researchers test an extremely large number of model variations on a given set of data, thereby inducing extreme overfitting. In finance,… Keep Reading

How much can the (in)accuracy of retirement portfolio modeling assumptions affect conclusions about the safety of retirement income? In their December 2014 paper entitled “How Risky is Your Retirement Income Risk Model?”, Patrick Collins, Huy Lam and Josh Stampfli examine potential weaknesses in the following retirement income modeling approaches: Theoretically grounded formulas – often complex with rigid assumptions. Historical backtesting – the… Keep Reading

Are stock return anomalies strongest when investor sentiment is highest or liquidity lowest? In the January 2015 draft version of his paper entitled “What Explains the Dynamics of 100 Anomalies?”, Heiko Jacobs  addresses these questions. He first identifies, categorizes and replicates 100 well-known or recently discovered long-short stock return anomalies related to: violations of the law of… Keep Reading