James O’Shaughnessy (Chairman and CEO of O’Shaughnessy Asset Management) introduces his 2011 book, What Works on Wall Street (Fourth Edition): the Classic Guide to the Best-Performing Investment Strategies of All Time, by stating: “…investors seem programmed by...
Is there a reliable way to improve the performance of conventional moving average signals? In the October 2011 and November 2011 versions of their papers entitled “An Improved Moving Average Technical Trading Rule” and “An Improved Moving...
Are firm earnings announcements bound to confound stock traders? In their November 2011 paper entitled “Systematic Noise and News-Driven Return Reversals”, Eric So and Sean Wang examine trading behavior around quarterly earnings announcements. They define...
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...
How can long-term investors maximize their edge of strategic patience? In their November 2011 paper entitled “Investing for the Long Run”, Andrew Ang and Knut Kjaer offer advice on successful long-term investing (such as by...
Is information technology moving in on qualitative event trading just as it has high-frequency quantitative algorithm trading? In the October 2011 version of their paper entitled “Event Driven Trading and the ‘New News'”, David Leinweber...
Does the size effect vary in an usefully predictable way? In the October 2011 revision of his paper entitled “Predicting the Small Stock Premium Over Different Horizons: What Do We Learn About Its Source?”, Valeriy Zakamulin...
An array of leveraged exchange-traded funds (ETF) track short-term (daily) changes in commodity and currency exchange indexes. Over longer holding periods, these ETFs tend to veer off track. The cumulative veer can be large. How...
Do asset classes consistently exhibit momentum over the same time frame as stocks? In his January 2006 investing policy entitled “Class OutPerformance (COP) Strategy”, Mal Williams describes a dynamic asset allocation strategy based on intermediate-term total...
Do somewhat abstract risk-based portfolio strategies translate to familiar stock/firm characteristic tilts? In their September 2011 paper entitled “Demystifying Equity Risk-Based Strategies: A Simple Alpha plus Beta Description”, Raul Leote de Carvalho, Xiao Lu and Pierre...
Is momentum on a losing streak? Or, has proliferation of momentum strategies extinguished the anomaly? In the October 2010 revision of his paper entitled “Are Momentum Strategies Still Profitable for U.S. Equity?”, Scott Wilson examines...
Does the S&P 500 Implied Volatility Index (VIX) measured at a monthly interval usefully predict stock market returns? To check, we consider four relationships: S&P 500 Depository Receipts (SPY) next-month return versus VIX monthly close. SPY next-month return versus VIX monthly range,...
Should investors strategically diversify across widely known equity market anomalies? In the October 2011 version of his paper entitled “Strategic Allocation to Premiums in the Equity Market”, David Blitz investigates whether investors should treat anomaly...
Do the size effect, value premium and momentum effect derive from common firm/stock characteristics other than size, book-to-market ratio and past return? In the October 2011 version of their paper entitled “Which Firms Are Responsible...
How long does it take stock markets to revert to their long-run means? In their April 2010 paper entitled “Mean Reversion in International Stock Markets: An Empirical Analysis of the 20 th Century”, Laura Spierdijk, Jacob...
An upward (downward) trend in implied volatilities with option maturity indicates that investors expect volatility to increase (decrease) over time. Do such expectations reliably predict future stock options prices? In his October 2011 paper entitled “Volatility...
Is selling insurance against stock market volatility reliably profitable? In the December 2010 version of his paper entitled “Variance Trading and Market Price of Variance Risk”, Oleg Bondarenko examines payoffs from synthesized variance swap contracts, derived...
Do relatively high trading frictions in the least developed equity markets offset associated diversification benefits? In the October 2011 version of their paper entitled “Frontier Market Diversification and Transaction Costs”, Ben Marshall, Nhut Nguyen and Nuttawat...
Do futures day traders make money? In the March 2011 version of their paper entitled “Overconfident Individual Day Traders: Evidence from a Natural Experiment”, Wei-Yu Kuo and Tse-Chun Lin investigate overconfidence and performance of day traders in...
Is science making progress in deconstructing the animal spirits at play in financial markets? In the October 2011 draft of his chapter entitled “Fear, Greed, and Financial Crises: A Cognitive Neurosciences Perspective”, Andrew Lo explores the...
Most momentum investing strategies employ cross-sectional or relative strength by taking long (short) positions in assets exhibiting medium-term price strength (weakness). Is momentum also exploitable intrinsically, wherein an investor estimates momentum of an asset relative to...
How do individual investors respond to an offer of free, unbiased investment advice? In their August 2010 paper entitled “Is Unbiased Financial Advice To Retail Investors Sufficient? Answers from a Large Field Study”, Utpal Bhattacharya,...
Studies of leveraged exchange-traded funds (ETF), such as those summarized in “The Unintended Characteristics of Leveraged and Inverse ETFs” and “The Performance of Leveraged ETFs over Extended Holding Periods”, find that the frequent rebalancing actions...
Does short-term (one-month) stock return reversal persist? If so, is there a best way to refine and exploit it? In their March 2012 paper entitled “Short-Term Return Reversal: the Long and the Short of It”,...
Does the effectiveness of momentum investing vary with market state? In the October 2011 version of their paper entitled “Market Cycles and the Performance of Relative-Strength Strategies”, Chris Stivers and Licheng Sun investigate how market...