Investing Research Articles

Which stock momentum return predictor works best? In his March 2015 paper entitled “Momentum Crash Management”, Mahdi Heidari compares the crash protection effectiveness of seven stock momentum return predictors, categorized into two groups:  Overall stock market statistics: prior-month market return; change in monthly market return; volatility of market returns (standard deviation of weekly returns for the past 52 weeks);… Keep Reading

What is the state of the hedge fund industry? In the July 2015 draft of their paper entitled “Hedge Funds: A Dynamic Industry In Transition”, Mila Getmansky, Peter Lee and Andrew Lo review recent academic research on hedge funds and update industry performance statistics. They surmise that  hedge fund data from 10 years ago may be unrepresentative of today’s… Keep Reading

Is an art collection a good investment? In the August 2015 version of their paper entitled “Art as an Asset and Keynes the Collector”, David Chambers, Elroy Dimson and Christophe Spaenjers study the performance of an actual buy-and-hold art portfolio, the collection of economist John Maynard Keynes. “Keynes purchased artworks through various channels between 1917 and 1945,… Keep Reading

How well do equity index option strategies work during crises? In his October 2015 paper entitled “The Performance of Equity Index Option Strategy Returns during the Financial Crisis”, Dominik Schulte tests the profitability of long and short equity index option strategies during the financial crisis of 2008, including long (as defined) and short (opposite) versions of: Call: buy a… Keep Reading

Do stop-losses usefully mitigate downside risk in realistic scenarios? In their November 2015 paper entitled “Stop-Loss Strategies with Serial Correlation, Regime Switching, and Transactions Costs”, Andrew Lo and Alexander Remorov analyze the value of stop-losses when asset returns are autocorrelated (trending), regime switching (bull and bear) and subject to trading costs. They consider daily and 10-day measurement intervals, with respective stop-loss ranges of… Keep Reading

What are the moving parts of an equity index covered call strategy, and what can investors do to enhance its performance? In the October 2015 update of their paper entitled “Covered Calls Uncovered”, Roni Israelov and Lars Nielsen decompose equity index covered call strategy returns into three risk premiums: (1) long equity; (2) short equity volatility; and, (3) long… Keep Reading

Should equity risk premium (ERP) forecasters assume in their models, because stocks always carry risk, that the premium cannot be negative? In their January 2016 paper entitled “Forecasting the Equity Risk Premium: The Ups and the Downs”, Nick Baltas and Dimitris Karyampas examine recent ERP forecasting research, with focus on simple models constrained to positive values. Their baseline model is a… Keep Reading

Is there an objective way to benchmark the performance of trend-following Managed Futures hedge funds? In their March 2016 paper entitled “Adaptive Time Series Momentum – Benchmark for Trend-Following Funds”, Peter Erdos and Gert Elaut test a futures timing system that increases (decreases) allocations when trends are emerging (fading) per 251 equally weighted, volatility-scaled, daily rebalanced time series momentum (TSMOM) strategies. Strategy lookback… Keep Reading

Do peaks in the S&P 500 Implied Volatility Index (VIX) signal positive abnormal U.S. stock market returns? If so, can investors exploit these returns? In the May 2016 version of his paper entitled “Abnormal Stock Market Returns Around Peaks in VIX: The Evidence of Investor Overreaction?”, Valeriy Zakamulin analyzes U.S. stock market returns around VIX peaks. He employs… Keep Reading

Should investors focus on past Sharpe ratio when picking individual stocks? In their June 2016 paper entitled “Don’t Stand So Close to Sharpe”, Angel Leon, Lluis Navarro and Belen Nieto compare 32 past performance metrics for effectiveness in selecting large capitalization U.S. stocks. They categorize these metrics into four groups: Eight related to Sharpe ratio. Six partial moment formulas (based on downside, or… Keep Reading