Investing Research Articles

Subscribers have asked whether risk-adjusted returns might work better than raw returns for ranking Simple Asset Class ETF Momentum Strategy (SACEMS) assets. In fact, “Alternative Momentum Metrics for SACEMS?” supports belief that Sharpe ratio beats raw returns. Is this finding strong enough to justify changing the strategy, which each month selects the best performers over a specified… Keep Reading

A “pump-and-dump” scheme promoter: (1) builds a position in a stock (often a thinly traded penny stock); (2) gooses its price by spreading misleading information; and, (3) liquidates the position once the stock reaches. Who responds to such schemes and what are their returns? In the December 2018 revision of their paper entitled “Who Falls Prey… Keep Reading

Is value of a firm’s patents a reliable predictor of its stock returns? In their November 2018 paper entitled “Patent-to-Market Premium”, Jiaping Qiu, Kevin Tseng and Chao Zhang investigate firm patent-to-market (PTM) ratio (percentage of market value attributable to patents) as a predictor of stock returns. They specify PTM ratio for each firm as follows: Measure stock reaction to… Keep Reading

Does active stock factor exposure management boost overall portfolio performance? In their November 2018 paper entitled “Optimal Timing and Tilting of Equity Factors”, Hubert Dichtl, Wolfgang Drobetz, Harald Lohre, Carsten Rother and Patrick Vosskamp explore benefits for global stock portfolios of two types of active factor allocation: Factor timing – exploit factor premium time series predictability based on economic indicators and… Keep Reading

Is stock price momentum an imperfect proxy for sensitivity of individual stocks to past dispersion of returns across stocks (zeta risk, or return dispersion)? In their November 2018 paper entitled “Market Risk and the Momentum Mystery”, James Kolari and Wei Liu investigate relationships between momentum and return dispersion as predictors of individual U.S. stock returns. They employ… Keep Reading

Below is a weekly summary of our research findings for 12/31/18 through 1/4/19. 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.

Does Cyclically-Adjusted Price-to-Earnings ratio (CAPE, or P/E10) usefully predict stock portfolio returns? In their October 2017 paper entitled “The Many Colours of CAPE”, Farouk Jivraj and Robert Shiller examine validity and usefulness of CAPE in three ways: (1) comparing predictive accuracies of CAPE at different horizons to those of seven competing valuation metrics (ratios of an income proxy… Keep Reading

Below is a weekly summary of our research findings for 12/24/18 through 12/28/18. 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.

Are there advantages to using leveraged exchange-traded funds (ETF) to implement conventional asset class exposures? In their October 2018 paper entitled “A Portfolio of Leveraged Exchange Traded Funds”, William Trainor, Indudeep Chhachhi and Chris Brown investigate performance of diversified portfolios of 2X or 3X leveraged ETFs that limit exposures to those typically achieved with 1X ETFs. Specifically, when… Keep Reading

Should investors rely on aggregate positions of speculators (large non-commercial traders) as indicators of expected futures market returns? In their November 2018 paper entitled “Speculative Pressure”, John Hua Fan, Adrian Fernandez-Perez, Ana-Maria Fuertes and Joëlle Miffre investigate speculative pressure (net positions of speculators) as a predictor of futures contract prices across four asset classes (commodity, currency, equity index and… Keep Reading