Investing Research Articles

One concern about simple momentum strategies is data snooping bias impounded in selection of the lookback interval(s) used to measure asset momentum. To circumvent this concern, we consider the following argument: The CBOE Volatility Index (VIX) broadly indicates the level of financial markets distress and thereby the tendency of investors to act complacently (when VIX… Keep Reading

How sensitive is performance of the “Simple Asset Class ETF Momentum Strategy” (SACEMS) to choice of momentum calculation lookback interval, and what interval works best? To investigate, we generate gross compound annual growth rates (CAGR) and maximum drawdowns (MaxDD) for SACEMS Top 1, equally weighted (EW) EW Top 2 and EW Top 3 portfolios over lookback… Keep Reading

Below is a weekly summary of our research findings for 12/9/24 through 12/13/24. 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.

Can expected trading frictions, as derived from trading volume forecasts, materially improve active stock portfolio net performance? In the May 2024 version of their paper entitled “Trading Volume Alpha”, flagged by a subscriber, Ruslan Goyenko, Bryan Kelly, Tobias Moskowitz, Yinan Su and Chao Zhang explore optimization of net stock portfolio performance by accounting for expected… Keep Reading

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

Are the human choices in studies that apply machine learning models to forecast stock returns critical to findings? In other words, is there a confounding machine learning design choices zoo? In their November 2024 paper entitled “Design Choices, Machine Learning, and the Cross-section of Stock Returns”, Minghui Chen, Matthias Hanauer and Tobias Kalsbach analyze effects… Keep Reading

A subscriber wondered whether choosing the fourth place asset class exchange-traded fund (ETF) rather than the third place class ETF for monthly reformation of the Simple Asset Class ETF Momentum Strategy (SACEMS) would matter if the difference in respective past returns over the ranking interval is less than 0.5%. To investigate, we take a broad,… Keep Reading

Do some stocks entail emotional relationships that alter investor perceptions of risk and return? Is the effect exploitable? In their November 2024 paper entitled “Investor Emotions and Asset Prices”, Shehub Bin Hasan, Alok Kumar and Richard Taffler develop and test a measure of the emotional state of the market and assess its implications for individual… Keep Reading

Below is a weekly summary of our research findings for 12/2/24 through 12/6/24. 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.

Are broad measures of public sociopolitical sentiment relevant to investors? Do they predict stock returns as indicators of exuberance and fear? To investigate, we relate S&P 500 Index return and 12-month trailing S&P 500 price-operating earnings ratio (P/E) to the percentage of respondents saying “yes” to the recurring Gallup polling question: “In general, are you… Keep Reading