January 13, 2016 - Momentum Investing
How sensitive is the performance of the “Simple Sector ETF Momentum Strategy” to selecting ranks other than winners and to choosing a momentum ranking interval other than six months? This strategy each month ranks the following nine sector exchange-traded funds (ETF) on past return and rotates to the strongest sector: Materials Select Sector SPDR (XLB) Energy Select Sector… Keep Reading
January 13, 2016 - Momentum Investing
Do simple momentum trading strategies applied to major U.S. stock market sectors outperform reasonable benchmarks? To investigate, we apply three simple momentum strategies to the nine sector exchange-traded funds (ETF) defined by the Select Sector Standard & Poor’s Depository Receipts (SPDR): Materials Select Sector SPDR (XLB) Energy Select Sector SPDR (XLE) Financial Select Sector SPDR… Keep Reading
January 12, 2016 - Equity Options
Is selling market index call options to finance, at least partly, buying crash protection in the form of put options a shrewd tactic? In their December 2016 paper entitled “Risk and Return of Equity Index Collars”, Roni Israelov and Matthew Klein investigate the performance of such equity index collars by decomposing their returns into equity risk premium and volatility… Keep Reading
January 11, 2016 - Equity Options
What are the moving parts of an equity index covered call strategy, and what can investors do to enhance its performance? In the October 2015 update of their paper entitled “Covered Calls Uncovered”, Roni Israelov and Lars Nielsen decompose equity index covered call strategy returns into three risk premiums: (1) long equity; (2) short equity volatility; and, (3) long… Keep Reading
January 8, 2016 - Volatility Effects
Are exchange-traded funds (ETF) efficient from a trading frictions perspective? In the October 2015 version of their paper entitled “ETF Liquidity”, Ben Marshall, Nhut Nguyen and Nuttawat Visaltanachoti examine magnitude of trading frictions, best liquidity metric, time-variation in liquidity time and liquidity-return relationship across a large number of ETFs. Their universe consists of 870 ETFs: 571 equity (411 U.S. and 160 international),… Keep Reading
January 7, 2016 - Individual Investing, Investing Expertise
Do SeekingAlpha and StockTwits offer valuable stock-picking information? In their March 2015 paper entitled “Crowds on Wall Street: Extracting Value from Collaborative Investing Platforms”, Gang Wang, Tianyi Wang, Bolun Wang, Divya Sambasivan, Zengbin Zhang, Haitao Zheng and Ben Zhao evaluate the stock-picking expertise available via SeekingAlpha and StockTwits. They tailor stock sentiment measures for these sources and relate these measures to… Keep Reading