Investing Research Articles

What is the best way to suppress trading frictions for active, long-term stock portfolios? In their September 2018 paper entitled “Comparing Cost-Mitigation Techniques”, Robert Novy-Marx and Mihail Velikov compare three approaches to suppression of trading frictions for long-term stock factor premium capture strategies: Limiting selection to stocks that are cheap to trade. Rebalancing infrequently. Imposing a penalty for… Keep Reading

…evidence from simple statistics suggests that investors should not count on the long-run stability of the equity investing environment or on continuity of short-term relationships between past and future returns.

Below is a weekly summary of our research findings for 10/29/18 through 11/2/18. 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.

How does use of actuarial estimates of retiree longevity and empirical mean reversion of stock market returns affect estimated retirement portfolio success rates? In the October 2018 revision of his paper entitled “Joint Effect of Random Years of Longevity and Mean Reversion in Equity Returns on the Safe Withdrawal Rate in Retirement”, Donald Rosenthal presents a… Keep Reading

Does combining the wisdom of multiple stock-picking models via ensemble methods, as done in forecasting landfall of hurricanes, improve investment portfolio performance? In their September 2018 paper entitled “Ensemble Active Management”, Alexey Panchekha, Robert Tull and Matthew Bell test the application of ensemble methods to active portfolio management, looking for consensus or near-consensus among multiple, independent stock picking sources. Ensemble… Keep Reading

Below is a weekly summary of our research findings for 10/22/18 through 10/26/18. 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.

Two major theories of asset pricing include: one based on asset risk (the market compensates inherent riskiness); and, another based on asset illiquidity (the market compensates illiquidity). In his July 2018 paper entitled “Illiquidity and Stock Returns: A Revisit”, Yakov Amihud presents cross-sectional and time series analyses of illiquidity and U.S. stock returns that extend the… Keep Reading

What are the implications of rapid global adoption of factor (smart beta) investing in single-factor, multi-factor and dynamic multi-factor strategies, most notably via equity exchange-traded funds (ETF). In their September 2018 paper entitled “Smart-Beta Herding and Its Economic Risks: Riding the Dragon?”, Eduard Krkoska and Klaus Schenk-Hoppé summarize the current state of smart beta investing, providing a… Keep Reading

Why do simple stock portfolios such as equal weighting and random weighting beat market capitalization weighting over the long run? In their June 2018 paper entitled “Diversification, Volatility, and Surprising Alpha”, Adrian Banner, Robert Fernholz, Vassilios Papathanakos, Johannes Ruf and David Schofield tackle this question by decomposing expected stock portfolio log-return into average growth rate and excess growth rate (EGR). They… Keep Reading

Quantitative investing involves disciplined rule-based approaches to help investors structure optimal portfolios that balance return and risk. How has such investing evolved? In their June 2018 paper entitled “The Current State of Quantitative Equity Investing”, Ying Becker and Marc Reinganum summarize key developments in the history of quantitative equity investing. Based on the body of research, they conclude… Keep Reading