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3495 Research Articles

SACEVS and SACEMS Strategy Momentum?

A subscriber suggested that the Simple Asset Class ETF Value Strategy (SACEVS) and the Simple Asset Class ETF Momentum Strategy (SACEMS) may each exhibit return momentum at the strategy level, such that an investor holding both as in Combined Value-Momentum Strategy (SACEVS-SACEMS) may want to tilt each month toward the one with stronger recent returns…. Keep Reading

Stock Market Valuation Ratio Trends

To determine whether the stock market is expensive or cheap, some experts use aggregate valuation ratios, either trailing or forward-looking, such as earnings-price ratio (E/P) and dividend yield. Under belief that such ratios are mean-reverting, most imminently due to movement of stock prices, these experts expect high (low) future stock market returns when these ratios… Keep Reading

Doom and the Stock Market

Is proximity to doom good or bad for the U.S. stock market? To measure proximity to doom, we use the Doomsday Clock “Minutes-to-Midnight” metric, revised intermittently in late January via the Bulletin of the Atomic Scientists, which “warns the public about how close we are to destroying our world with dangerous technologies of our own… Keep Reading

Actual Retail Option Trading/Returns

Given wide bid-ask spreads, do retail option traders systematically bear large losses? In their January 2024 paper entitled “An Anatomy of Retail Option Trading”, Vincent Bogousslavsky and Dmitriy Muravyev characterize retail option trading in the U.S. by exploiting data from a trading journal that attracts retail investors by offering advanced tracking/performance verification tools. When users subscribe… Keep Reading

Understandable AI Stock Pricing?

Can explainable artificial intelligence (AI) bridge the gap between complex machine learning predictions and economically meaningful interpretations? In their December 2023 paper entitled “Empirical Asset Pricing Using Explainable Artificial Intelligence”, Umit Demirbaga and Yue Xu apply explainable artificial intelligence to extract the drivers of stock return predictions made by four machine learning models: XGBoost, decision… Keep Reading

Weekly Summary of Research Findings: 2/5/24 – 2/9/24

Below is a weekly summary of our research findings for 2/5/24 through 2/9/24. 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.

Treasury Yields and Inflation Lead-lag

Which comes first, adjustments in U.S. Treasuries yields across the term structure, or government announcement of new U.S. inflation data? To investigate, we relate monthly changes in yields for 1-year, 2-year, 3-year, 5-year, 7-year, 10-year, 20-year and 30-year U.S. Treasuries (GS1 through GS30) to monthly change in overall raw Consumer Price Index (CPI) for various… Keep Reading

Causal Discovery Applications in Stock Investing

Can causal discovery algorithms (which look beyond simple statistical association, and instead consider all available data and allow for lead-lag relationships) make economically meaningful contributions to equity investing? In their December 2023 paper entitled “Causal Network Representations in Factor Investing”, Clint Howard, Harald Lohre and Sebastiaan Mudde assess the economic value of a representative score-based… Keep Reading

Causality in the 5-factor Model of Stock Returns

Does the Fama-French 5-factor model of stock returns stand up to causality analyses? Do the factors cause the returns? In their December 2023 paper entitled “Re-Examination of Fama-French Factor Investing with Causal Inference Method”, Lingyi Gu, Ellen Zhang, Andrew Heinz, Jingxuan Liu, Tianyue Yao, Mohamed AlRemeithi and Zelei Luo construct causal graphs to analyze the… Keep Reading

Party in Power and Stock Returns

Past research relating U.S. stock market returns to the party holding the Presidency mostly concludes that Democratic presidents are better for the stock market than Republican presidents. However, Presidents share power conferred by the electorate with Congress. Does historical data confirm that Democratic control of Congress is also better for stock market returns than Republican… Keep Reading