Investing Research Articles

Does the interaction of paradigmatic indicators of optimism (lumber demand) and pessimism (gold demand) tell investors when to take risk and when to avoid risk? In their May 2015 paper entitled “Lumber: Worth Its Weight in Gold: Offense and Defense in Active Portfolio Management”, Charles Bilello and Michael Gayed examine the recent relative performance of lumber (a proxy… Keep Reading

What is the best way to implement a value strategy for U.S. stocks? In their May 2015 paper entitled “Optimizing Value”, Ran Leshem, Lisa Goldberg and Alan Cummings investigate how the choice of value metric and implementation approach affect value strategy performance. They first compare book value-to-price ratio (B/P) and earnings-to-price ratio (E/P) based on returns for portfolios of the top 30% of stocks… Keep Reading

Are there gradual steps toward a fundamental stock index that work just as well? In their April 2015 draft paper entitled “Decomposing Fundamental Indexation”, Gregg Fisher, Ronnie Shah and Sheridan Titman compare fundamental indexing strategies to strategies that tilt a market index toward high fundamental-to-price stocks. Fundamental indexing strategies weight stocks by firm fundamentals instead of market capitalizations, ignoring any information in stock… Keep Reading

Are mutual fund managers whose holdings deviate most from their benchmarks the best performers? In their April 2015 paper entitled “Deactivating Active Share”, Andrea Frazzini, Jacques Friedman and Lukasz Pomorski investigate whether Active Share is a reliable indicator of future mutual fund performance. Active Share measures the distance between a portfolio and its benchmark, ranging from zero for a portfolio that is… Keep Reading

In the introduction to their 2015 book entitled Invest with the Fed: Maximizing Portfolio Performance by Following Federal Reserve Policy, authors Robert Johnson, Gerald Jensen and Luis Garcia-Feijoo state: “Our purpose in writing this book is to provide a general overview of the Fed’s role in the financial markets, but, more important, to offer investors a road… Keep Reading

Can currency carry traders improve performance by excluding “bad” currencies? In the April 2015 version of their paper entitled “Good Carry, Bad Carry”, Geert Bekaert and George Panayotov investigate the differences between good and bad carry trades (long high-yield and short low-yield) constructed from G-10 currencies. They define good (bad) trades as those with relatively high (low) Sharpe ratios… Keep Reading

Can investors amplify stock return momentum by screening past winners and losers based on return skewness? In their April 2015 paper entitled “Expected Skewness and Momentum”, Heiko Jacobs, Tobias Regele and Martin Webee explore the interaction of expected stock return skewness and momentum. They measure expected skewness as maximum daily return over the preceding month, which predicts future skewness… Keep Reading

What is the best approach for measuring extreme loss risk? In their April 2015 paper entitled “Why Risk Is So Hard to Measure”, Jon Danielsson and Chen Zhou analyze the robustness of standard extreme loss risk analysis methods. They focus on: The difference in the reliabilities of forecasts based on Value-at-Risk (VaR) and expected shortfall (ES).  The… Keep Reading

When does value investing work and how does it work best? In the April 2015 initial draft of their paper entitled “Fact, Fiction, and Value Investing”, Clifford Asness, Andrea Frazzini, Ronen Israel and Tobias Moskowitz address areas of confusion about value investing. They describe value as the tendency of cheap securities to outperform expensive ones based on some valuation method. They broadly specify the value premium… Keep Reading

Do smart beta exchange-traded funds (ETF), which systematically tilt holdings to capture one or more factor premiums (such as size, value, momentum, quality, beta and volatility), offer net value to investors? In the April 2015 initial draft of his paper entitled “How Smart are ‘Smart Beta’ ETFs? Analysis of Relative Performance and Factor Timing”, Denys Glushkov assesses whether… Keep Reading