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Investing Research Articles

3422 Research Articles

Compressing the Equity Factor Zoo

The number of published factors significantly explaining variation in individual stock returns has grown steadily over time into the hundreds, inviting the term “factor zoo.” Are all these factors important when applied in combination? In their October 2023 paper entitled “Factor Zoo”, Alexander Swade, Matthias Hanauer, Harald Lohre and David Blitz assess compressibility of the… Keep Reading

Look-ahead Bias in Option Trading Backtests

Numerous option trading studies report finding strategies with remarkably high mean returns and Sharpe ratios. Are these findings too good to be true? In their October 2023 paper entitled “Too Good to Be True: Look-ahead Bias in Empirical Option Research”, Jefferson Duarte, Christopher Jones, Mehdi Khorram and Haitao Mo investigate the extent to which look-ahead… Keep Reading

Inflation Forecast Update

The Inflation Forecast now incorporates actual total and core Consumer Price Index (CPI) data for October 2023. The actual total (core) inflation rate is lower than (lower than) forecasted.

Using Firm Fundamentals to Build Better Stock Indexes

Do conventional market capitalization-weighted stock indexes suffer from a long-term buy-high/sell-low performance drag when adding and deleting stocks? In their October 2023 paper entitled “Reimagining Index Funds”, Robert Arnott, Chris Brightman, Xi Liu and Que Nguyen construct alternative indexes that select stocks based on fundamental measures of underlying firm size and then weight them by… Keep Reading

Seasonal SACEVS-SACEMS Strategy?

A subscriber requested testing of a strategy that holds a combination of 50%  Simple Asset Class ETF Value Strategy (SACEVS) Best Value and 50% Simple Asset Class ETF Momentum Strategy (SACEMS) equal-weighted (EW) Top 2 strategies during November through April and idle cash during May through October. We consider three strategies: Best Value – EW Top… Keep Reading

Weekly Summary of Research Findings: 11/6/23 – 11/10/23

Below is a weekly summary of our research findings for 11/6/23 through 11/10/23. 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.

All Stocks All the Time?

Is the the conventional retirement portfolio glidepath as recommended by many financial advisors, away from stocks and toward bonds over time, really optimal? In their October 2023 paper entitled “Beyond the Status Quo: A Critical Assessment of Lifecycle Investment Advice”, Aizhan Anarkulova, Scott Cederburg and Michael O’Doherty present a lifecycle income/wealth model using stationary block… Keep Reading

Beat the Market with Covered Calls?

Do covered call strategies, which offer both long equity and short volatility exposures, beat their underlying equities? In their October 2023 paper entitled “A Devil’s Bargain: When Generating Income Undermines Investment Returns”, Roni Israelov and David Ndong test a strategy of each month selling and holding to maturity cash-settled covered calls on the S&P 500… Keep Reading

Public Debt, Inflation and the Stock Market

When the U.S. government runs substantial deficits, some experts proclaim the dollar’s inevitable inflationary debasement and bad times for stocks. Other experts say that deficits are no cause for alarm, because government spending stimulates the economy, and the country can bear more debt. Who is right? Using quarterly nominal level of the U.S. public debt, interest… Keep Reading

Predicting Short-term Market Returns with LLM-generated Market Sentiment

Does financial news sentiment as interpreted by large language models (LLM) such as ChatGPT and BARD predict short-term stock market returns? In their September 2023 paper entitled “Large Language Models and Financial Market Sentiment”, Shaun Bond, Hayden Klok and Min Zhu separately test the abilities of ChatGPT and BARD to predict daily, weekly and monthly… Keep Reading