Investing Research Articles

How profitable is automated multi-horizon extraction of liquidity premiums in currency exchange markets? In their April 2017 paper entitled “The Alpha Engine: Designing an Automated Trading Algorithm”, Anton Golub, James Glattfelder and Richard Olsen introduce an adaptive counter-trend algorithmic trading system that seeks liquidity premiums from price series via automated trades at adaptive market events. The… Keep Reading

Can investors improve retirement glide paths via judicious use of smart beta funds? In their March 2017 paper entitled “Life Cycle Investing and Smart Beta Strategies”, Bill Carson, Sara Shores and Nicholas Nefouse augment a conventional equities-bonds life cycle investing glide path with smart beta strategies. They use a conventional glide path, which gradually decreases the allocation to… Keep Reading

What’s the best way to combine profitability and value in screening stocks? In their April 2017 paper entitled “The Magic Formula: Value, Profitability, and the Cross Section of Global Stock Returns”, Douglas Blackburn and Nusret Cakici compare performances of a portfolio based on the Magic Formula (MF) and a portfolio based on an Improved Magic Formula… Keep Reading

How well do time series (intrinsic) and cross-sectional (relative) momentum work for different types of currency exchange rates? In their April 2017 paper entitled “Momentum in Traditional and Cryptocurrencies Made Simple”, Janick Rohrbach, Silvan Suremann and Joerg Osterrieder compare the effectiveness of time series and cross-sectional momentum as applied to three groups of currency exchange rates: G10 currencies;… Keep Reading

What makes trend-following tick? In the April 2017 version of his paper entitled “What Drives Trend-Following Profits?”, Adrian Zoicas-Ienciu investigates sources of trend-following profits in equity indexes and stocks. He focuses on daily trading signals for Dow Jones Industrial Average (DJIA) closing levels, as follows: Each day after the close, he compares the DJIA close to… Keep Reading

Is there a reliable way to forecast spikes in U.S. stock market expected volatility, as measured by the CBOE Volatility Index (VIX), and thereby avoid or exploit associated market declines? In his April 2017 paper entitled “Forecasting a Volatility Tsunami”, Andrew Thrasher examines several calm-before-the-storm signals for predicting spikes in VIX, which he defines as a 30%… Keep Reading

Are anomaly premiums (expected winners minus losers among assets within a class, based on some asset characteristic) more or less predictable than broad market returns? In their April 2017 paper entitled “Predicting Relative Returns”, Valentin Haddad, Serhiy Kozak and Shrihari Santosh apply principal component analysis to assess the predictability of premiums for published asset pricing anomalies spanning stocks,… Keep Reading

Does stock momentum purified of market, size and book-to-market factor risks (idiosyncratic or residual or pure momentum) distinctly outperform conventional momentum? In their April 2017 paper entitled “The Idiosyncratic Momentum Anomaly”, David Blitz, Matthias Hanauer and Milan Vidojevic revisit idiosyncratic past stock return as a return predictor. They specify conventional momentum as total return from 12 months ago… Keep Reading

Are financial markets best viewed as massively multiplayer gambling? In his March 2017 paper entitled “Why Markets Are Inefficient: A Gambling ‘Theory’ of Financial Markets for Practitioners and Theorists”, Steven Moffitt presents a model of financial markets based on the perspective of an analytical/enlightened gambler. The gambler believes that: (1) actions of many players (some astute,… Keep Reading

We developed the Simple Asset Class ETF Momentum Strategy (SACEMS) about six years ago and the Simple Asset Class ETF Value Strategy (SACEVS) about two years ago independently, focusing on the separate logic of asset choices for each. As tested in “SACEMS-SACEVS Mutual Diversification”, these two strategies are mutually diversifying, so combining them works better… Keep Reading