Investing Research Articles

What are the most pressing systematic weaknesses in financial research, and how should the investment community address them? In the May 2015 version of his article entitled “The Future of Empirical Finance”, Marcos Lopez de Prado identifies three major problems in empirical finance and proposes ways to mitigate them. Based on his experience and common sense arguments and references… Keep Reading

Is it possible to test factor models of stock returns directly on individual stocks rather than on portfolios of stocks sorted per preconceived notions of factor importance. In their November 2015 paper entitled “Tests of Alternative Asset Pricing Models Using Individual Security Returns and a New Multivariate F-Test”, Shafiqur Rahman, Matthew Schneider and Gary Antonacci apply a statistical… Keep Reading

Are the backtests provided for alternative beta investment products representative of their future live performance? In their March 2016 paper entitled “Quantifying Backtest Overfitting in Alternative Beta Strategies”, Antti Suhonen, Matthias Lennkh and Fabrice Perez compare the backtested and live performances of alternative beta products offered by investment banks. The strategies underlying these products are formulaic and non-discretionary, designed to extract… Keep Reading

Is there a unique stock risk factor associated with expectations of a bear market? In the November 2016 version of their paper entitled “Bear Beta”, Zhongjin Lu and Scott Murray relate a put option-based indicator of the risk that the U.S. equity market will enter a bear state to individual stock returns. This indicator is based on two… Keep Reading

Do specific stocks react differently to economic uncertainty? In their December 2016 paper entitled “Is Economic Uncertainty Priced in the Cross-Section of Stock Returns?”, Turan Bali, Stephen Brown and Yi Tang investigate the role of economic uncertainty in the cross-sectional pricing of individual stocks. They measure economic uncertainty monthly as an aggregation of the volatilities of the unpredictable components… Keep Reading

Do stocks with expectations of high capital expenditures (growth opportunities) outperform those with expectations of low capital expenditures? In their December 2016 paper entitled “Expected Investment Growth and the Cross Section of Stock Returns”, Jun Li and Huijun Wang examine the power of expected investment growth (EIG) to predict cross-sectional stock returns. They construct EIG for each stock… Keep Reading

How many factors are optimal for modeling future returns of individual stocks? How do these factors relate to conventionally used factors (market, size, value, momentum, investment, profitability…)? In the June 2016 version of their paper entitled “Multifactor Models and the APT: Evidence from a Broad Cross-Section of Stock Returns”, Ilan Cooper, Paulo Maio and Dennis Philip derive… 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

Below is a weekly summary of our research findings for 12/9/24 through 12/13/24. These summaries give you a quick snapshot of our content the past week so that you can quickly decide what’s relevant to your investing needs. Subscribers: To receive these weekly digests via email, click here to sign up for our mailing list.