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Investing Research Articles

3240 Research Articles

Simplest Asset Class ETF Momentum Strategy Update

A subscriber asked about an update of “Simplest Asset Class ETF Momentum Strategy?”, which each month holds SPDR S&P 500 ETF Trust (SPY) or iShares 20+ Year Treasury Bond (TLT)  depending on which has the higher total return over the last three months, including a direct comparison to a portfolio that each month allocates 50%… Keep Reading

Option Gamma and Associated Future Stock Returns

Is option gamma, which indicates how aggressively option market makers must trade underlying stocks to hedge their option positions, a systematic driver of those stock returns? In his October 2022 paper entitled “Option Gamma and Stock Returns”, Amar Soebhag investigates the relationship between option gamma for individual stocks and future returns of those stocks. He… Keep Reading

Weekly Summary of Research Findings: 11/7/22 – 11/11/22

Below is a weekly summary of our research findings for 11/7/22 through 11/11/22. 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.

Stocks-Bonds Return Correlation and Inflation

A subscriber asked whether the correlation between returns on stocks and bonds is elevated when inflation is above 5%, such that equities and fixed income offer little diversification protection. To investigate, we calculate the U.S. overall inflation rate from monthly values of the consumer price index over the prior year to find months with the… Keep Reading

Inflation Forecast Update

The Inflation Forecast now incorporates actual total and core Consumer Price Index (CPI) data for October 2022. The actual total (core) inflation rate is about as (slightly lower than) forecasted.

Modified Test of P/E10 Usefulness

In response to the U.S. stock market timing backtest in “Usefulness of P/E10 as Stock Market Return Predictor”, a subscriber suggested a modification for exploiting P/E10 (or Cyclically Adjusted Price-Earnings ratio, CAPE). Instead of binary signals that buy (sell) stocks when P/E10 crosses below (above) its historical average, employ a scaled allocation to stocks that… Keep Reading

Usefulness of P/E10 as Stock Market Return Predictor

Does P/E10 (or Cyclically Adjusted Price-Earnings ratio, CAPE) usefully predict U.S. stock market returns? Per Robert Shiller’s data, P/E10 is inflation-adjusted S&P Composite Index level divided by average monthly inflation-adjusted 12-month trailing earnings of index companies over the last ten years. To investigate its usefulness, we consider in-sample regression/ranking tests and out-of-sample cumulative performance tests. Using monthly values of… Keep Reading

Federal Reserve Treasuries Holdings and Asset Returns

Is the level, or changes in the level, of Federal Reserve (Fed) holdings of U.S. Treasuries (bills, notes, bonds and TIPS, measured weekly as of Wednesday) an indicator of future stock market and/or Treasuries returns? To investigate, we take dividend-adjusted SPDR S&P 500 (SPY) and iShares Barclays 20+ Year Treasury Bond (TLT) as tradable proxies for the U.S…. Keep Reading

SACEMS Equal-weighted 2-3 Portfolio

Referring to “SACEMS Top 1 Mean Reversion?”, a subscriber asked about the performance of the equal-weighted (EW) second and third ranked Simple Asset Class ETF Momentum Strategy (SACEMS) assets both as a standalone strategy and in 50-50 combination with the Simple Asset Class ETF Value Strategy (SACEVS) Best Value portfolio. This alternative portfolio (SACEMS EW… Keep Reading

Weekly Summary of Research Findings: 10/31/22 – 11/4/22

Below is a weekly summary of our research findings for 10/31/22 through 11/4/22. 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.