Investing Research Articles

Has (hypothetical) equity factor investing worked as well in recent years as indicated in past studies? In his July 2015 paper entitled “Factor Investing Revisited”, David Blitz updates his prior study quantifying the performance of allocations to U.S. stocks based on three factor premiums: (1) value (high book-to-market ratio); (2) momentum (high return from 12 months… Keep Reading

Can traders use S&P 500 Implied Volatility Index (VIX) options to exploit predictability in behaviors of underlying VIX futures. In his June 2015 paper entitled “Trading the VIX Futures Roll and Volatility Premiums with VIX Options”, David Simon examines VIX option trading strategies that: Buy VIX calls when VIX futures are in backwardation (difference between the front VIX… Keep Reading

Do any mutual funds reliably generate significant alpha and, if so, do fund investors receive this alpha? In their June 2015 paper entitled “Active Managers Are Skilled”, Jonathan Berk and Jules Van Binsbergen examine interactions among equity mutual fund gross alpha, assets under management, fees and net alpha. To measure a practical gross alpha, they benchmark active mutual fund… Keep Reading

What volatility weighting scheme best exploits equity return volatility persistence based on net outcome? In the June 2015 version of his paper entitled “Dynamic Volatility Weighting in the Presence of Transaction Costs”, Valeriy Zakamulin examines a volatility weighting strategy with features that allow suppression of rebalancing frictions. The idea behind volatility weighting is to construct a portfolio that targets a specified (benchmark)… Keep Reading

Is time series (intrinsic or absolute) momentum evident in international stock indexes and commodity indexes? In the June 2015 version of their paper entitled “The Trend is Your Friend: Time-Series Momentum Strategies Across Equity and Commodity Markets”, Athina Georgopoulou and George Wang test intrinsic momentum trading strategies that are each month long (short) equally weighted indexes with a… Keep Reading

Stock return anomaly studies based on firm accounting variables generally employ annually reformed portfolios that are long (short) the tenth of stocks expected to perform well (poorly). Does adding monthly portfolio updates based on technical stock price trend measurements boost anomaly portfolio performance? In the June 2015 version of their paper entitled “Anomalies Enhanced: The Use… Keep Reading

We have made three changes to the “Simple Asset Class ETF Value Strategy” (SACEVS) based on results of  robustness tests and subscriber comments: To employ fresher data, we decrease the SACEVS S&P 500 Index level and bond/bill yield measurement interval from quarterly to monthly. S&P 500 Index operating earnings updates are still quarterly. To employ fresher data, we… Keep Reading

Which is better, sector-based or factor-based stock investing? In their June 2015 paper entitled “Factor-Based v. Industry-Based Asset Allocation: The Contest”, Marie Briere and Ariane Szafarz compare the attractiveness of sector-based and factor-based U.S. stock allocations. From Kenneth French’s data library, they extract return series for 10 sectors and five factors (size, value, profitability, investment and momentum). They expand the factor set to 10… Keep Reading

Do equity style mutual funds look more attractive when benchmarked to matched style stock indexes than to more theoretical factor models of stock returns? In their April 2015 paper entitled “On Luck versus Skill When Performance Benchmarks are Style-Consistent”, Andrew Mason, Sam Agyei-Ampomah, Andrew Clare and Steve Thomas compare alphas for U.S. equity style mutual funds as calculated with conventional factor models… Keep Reading

“Simple Asset Class ETF Value Strategy” (SACEVS) tests a simple relative value strategy that each quarter allocates funds to one or more of the following three asset class exchange-traded funds (ETF), plus cash, based on degree of undervaluation of measures of the term risk, credit risk and equity risk premiums: 3-month Treasury bills (Cash)iShares 7-10 Year Treasury Bond (IEF)iShares… Keep Reading