Investing Research Articles

A subscriber hypothesized that combining short-term reversal with intermediate-term momentum would enhance momentum strategy performance. To investigate, we test a modification of the “Simple Asset Class ETF Momentum Strategy”, which each month allocates all funds at the end of each month to the one of the following asset class exchange-traded funds (ETF) or Cash with the highest… Keep Reading

Do lottery traders create the low-volatility (betting-against-beta) effect by overpricing high-beta stocks? In the December 2014 version of their paper entitled “Betting against Beta or Demand for Lottery”, Turan Bali, Stephen Brown, Scott Murray and Yi Tang investigate whether demand for lottery-like stocks drives the empirically low (high) abnormal returns of stocks with high (low)… Keep Reading

Is the reward for holding risky bonds material and distinct from the reward for holding stocks and the reward for holding longer term bonds? In their February 2015 paper entitled “Credit Risk Premium: Its Existence and Implications for Asset Allocation”, Attakrit Asvanunt and Scott Richardson measure and explore the predictability and diversification power of the credit (or default) risk premium… Keep Reading

Is there a more precise way to measure the premium available to investors willing to bear volatility risk than overall return variance? In their January 2015 paper entitled “Downside Variance Risk Premium”, Bruno Feunou, Mohammad Jahan-Parvar and Cedric Okou investigate the usefulness of  (1) decomposing the variance risk premium (the difference between option-implied and realized variance)… Keep Reading

Are short sellers on average well-informed, such that aggregate equity short interest usefully predicts stock market returns? In the January 2015 draft of their paper entitled “Short Interest and Aggregate Stock Returns”, David Rapach, Matthew Ringgenberg and Guofu Zhou investigate the relationship between aggregate equity short interest and future stock market performance. They aggregate short interest as the equally… Keep Reading

A subscriber requested corroboration of the findings in “Simple Debt Class Mutual Fund Momentum Strategy” with a universe restricted to a family of bond funds (such as Fidelity) to enable low-cost fund switching. We therefore apply the strategy to the following ten Fidelity mutual funds: Investment Grade Bond (FBNDX) Intermediate Bond (FTHRX) Government Income (FGOVX) Mortgage Securities (FMSFX) GNMA (FGMNX) Short-Term… Keep Reading

Are stock return anomalies strongest when investor sentiment is highest or liquidity lowest? In the January 2015 draft version of his paper entitled “What Explains the Dynamics of 100 Anomalies?”, Heiko Jacobs  addresses these questions. He first identifies, categorizes and replicates 100 well-known or recently discovered long-short stock return anomalies related to: violations of the law of… Keep Reading

Which method of relative currency valuation works best for currency trading? In their February 2015 paper entitled “Currency Value Strategies”, Ahmad Raza, Ben Marshall and Nuttawat Visaltanachoti run a horse race of four currency value strategies: Real Exchange Rate: nominal spot exchange rate with the U.S. dollar times the ratio of local consumer prices in local currency to U.S…. Keep Reading

Do changes in hedge fund holdings and short interest in a stock together predict its returns? In their January 2015 paper entitled “Short Selling Meets Hedge Fund 13F: An Anatomy of Informed Demand”, Yawen Jiao, Massimo Massa and Hong Zhang test whether joint changes in aggregate hedge fund holdings and short interest of a stock relate to its future returns. They define… Keep Reading

Do stock return anomalies exhibit January and month-of-quarter (first, second or third, excluding January) effects? In his February 2015 paper entitled “Seasonalities in Anomalies”, Vincent Bogousslavsky investigates whether the following 11 widely cited U.S. stock return anomalies exhibit these effects: Market capitalization (size) – market capitalization last month. Book-to-market – book equity (excluding stocks with negative values) divided by market… Keep Reading