Do hedge funds trade on market risk, idiosyncratic risk or tail risk? In their November 2011 paper entitled “Systematic Risk and the Cross-Section of Hedge Fund Returns”, Turan Bali, Stephen Brown and Mustafa Caglayan explore the...
Does momentum investing work for currencies as it does for equities? In the December 2011 version of their paper entitled “Currency Momentum Strategies”, Lukas Menkhoff, Lucio Sarno, Maik Schmeling and Andreas Schrimpf investigate momentum strategies...
Can investors earn a reliable premium from stocks with high downside risk? In their January 2012 paper entitle “Sorting Out Downside Beta”, Thierry Post, Pim Van Vliet and Simon Lansdorp measure in four ways (including regular...
In the brief August 2011 paper entitled “Paired-switching for Tactical Portfolio Allocation”, flagged by a subscriber, Akhilesh Maewal and Joel Bock investigate the efficiency of a simple momentum strategy applied to pairs of exchange-traded funds (ETF)...
Over the past few days, in the background, we have updated and rationalized “Simple Sector ETF Momentum Strategy” (update pending) and “Doing Momentum with Style (ETFs)” (update just published). Updated means adding data for December 2011. Rationalized means...
How do individual investors adjust trading behaviors during bull and bear markets? Are any such adjustments advantageous? In their December 2011 paper entitled “Don’t Confuse Brains with a Bull Market: Attribution Bias, Market Condition, and...
...evidence from simple tests does not support a belief that investors/traders tend to exit the market before three-day weekends and re-enter after. There may be some tendency toward extra bullishness (bearishness) before (after) three-day weekends,...
Are realized (actual historical) and implied volatilities the whole story for equity option valuation? In their December 2011 paper entitled “Fundamental Analysis and Option Returns”, Theodore Goodman, Monica Neamtiu and Frank Zhang investigate the extent to...
Can investors exploit idiosyncratic volatility exhibited by commodity futures? In their December 2011 paper entitled “Idiosyncratic Volatility Strategies in Commodity Futures Markets”, Adrian Fernancez-Perez, Ana-Maria Fuertes and Joelle Miffre investigate the usefulness of idiosyncratic volatility as...
Are the relatively placid financial markets of the American Century evolving to a high-volatility regime in a more evenly competitive world? In his December 2011 paper entitled “Adaptive Markets and the New World Order”, Andrew Lo examines...
A subscriber suggested applying a simple momentum trading strategy to a set of leveraged equity style (size, value-growth) exchanged-traded funds (ETF), including leveraged long and leveraged short counterparts to exploit both positive and negative markets. It seems...
An update to the “What Works Best?” page makes the discussion more expansive (to address strategic asset allocation), shifts emphasis and adds references.
How many commodity sectors are relevant for portfolio diversification planning, and how do their behaviors differ? In their December 2011 paper entitled “How Many Commodity Sectors Are There, and How Do They Behave?”, Geetesh Bhardwaj and...
Do stock analysts elected to All-American (AA) status by institutional voters (via Institutional Investor magazine) reliably out-pick other analysts? In the December 2011 update of their paper entitled “Are Stars’ Opinions Worth More? The Relation...
Is strategic asset class allocation or active management paramount for U.S. university endowment investment performance? In the October 2011 draft of their paper entitled “Do (Some) University Endowments Earn Alpha?”, Brad Barber and Guojun Wang...
An updated Investing Demons now includes relevant research summary statements from the past year. This section provides a broad perspective on the content of CXOadvisory.com.
Which widely used valuation metric is best for picking individual stocks? In their November 2011 paper entitled “Analyzing Valuation Measures: A Performance Horse-Race over the past 40 Years”, Wesley Gray and Jack Vogel compare the performances of...
A subscriber suggested applying simple momentum trading strategies to a set of leveraged equity style (size, value-growth) funds. It seems plausible that leverage may make funds react quickly and strongly to business cycle shifts that affect style...
Should investors believe in the superiority of stocks for the long run and bonds for the short run? In his December 2011 paper entitled “Stocks, Bonds, Risk, and the Holding Period: An International Perspective”, Javier...
Do analysts who work for hedge funds make good calls? In their November 2011 paper entitled “Do Buy-side Recommendations Have Investment Value?”, Steven Crawford, Wesley Gray, Bryan Johnson and Richard Price III profile analysts employed by...
Is risk avoidance by itself a good tactical asset allocation strategy? In their November 2011 paper entitled “A Risk Based Approach to Tactical Asset Allocation”, Dario Brandolini and Stefano Colucci propose a purely risk-based asset allocation framework...
Do real estate investments protect investors from inflation? In their November 2011 paper entitled “Inflation and Real Estate Investments”, Bradford Case and Susan Wachter examine whether real estate investment returns protect consumers from loss of purchasing power....
Do the poor returns and high volatility of the “buy-and-hold-is-dead” U.S. stock market since the beginning of 2000 represent a tailwind for market timers? In other words, is buy-and-hold effective as a benchmark for distinguishing...
Research on the U.S. equity market indicates that “old” or intermediate momentum (12 months ago to 7 months ago) is much more important than “new” or recent momentum (6 months ago to two months ago, incorporating a...
Are the least developed markets also the least efficient, and therefore the best places to look for alpha? Two recent papers address this question for large, sophisticated investors (institutional funds). In the October 2011 version...