Investing Research Articles

Is past performance a useful indicator of future performance for some kinds of mutual funds? In their April 2014 paper entitled “Differences in Short-Term Performance Persistence by Mutual Fund Equity Class”, Larry Detzel and Andrew Detzel evaluate performance persistence among diversified U.S. equity mutual funds categorized per the Morningstar Equity Style Box: Large Value (LV), Large Blend (LB), Large… Keep Reading

Do prices exhibit persistently exploitable trends across asset classes all the time? In their April 2014 paper entitled “Two Centuries of Trend Following”, Y. Lemperiere, C. Deremble, P. Seager, M. Potters and J. P. Bouchaud examine risk-adjusted performance of a trend following strategy across four asset classes (commodities, currencies, stock indexes, bonds) over very long sample periods. They generate… Keep Reading

Does the reward for taking the risk of holding stocks exhibit any long-term trend? In his April 2014 presentation package entitled “The Incredible Shrinking ‘Realized’ Equity Risk Premium”, Claude Erb examines the trend in the realized U.S. equity risk premium (ERP) since 1925. He defines this ERP as the retrospective difference in 10-year yield between the broad… Keep Reading

Are simple moving averages (SMA) effective in generating signals for short-term currency trading? In the April 2014 draft of his paper entitled “ANANTA: A Systematic Quantitative FX Trading Strategy”, Nicolas Georges investigates the effectiveness of fast (2-day) and slow (15-day) SMAs as indicators of currency exchange rate evolutions when applied to ten G10 currency pairs… Keep Reading

Does stock market timing based on simple moving average (SMA) and time-series (intrinsic or absolute) momentum strategies really work? In the November 2013 version of his paper entitled “The Real-Life Performance of Market Timing with Moving Average and Time-Series Momentum Rules”, Valeriy Zakamulin tests realistic long-only implementations of these strategies with estimated trading frictions. The… Keep Reading

Do Morningstar’s analyst ratings predict which mutual funds will do best? In their January 2014 paper entitled “Going for Gold: An Analysis of Morningstar Analyst Ratings”, Will Armstrong, Egemen Genc and Marno Verbeek examine the performance of mutual funds after Morningstar assigns analyst ratings to them. Morningstar initiated these substantially qualitative ratings (Gold, Silver, Bronze,… Keep Reading

Does the utilities sector exhibit a useful lead-lag relationship with the broad stock market? In their January 2014 paper entitled “An Intermarket Approach to Beta Rotation: The Strategy, Signal and Power of Utilities”, Charles Bilello and Michael Gayed test a simple strategy that holds either the U.S. utilities sector or the broad U.S. stock market based… Keep Reading

Do active investment managers beat the market? In their January 2014 paper entitled “Active Manager Performance: Alpha and Persistence”, Frank Benham and Edmund Walsh assess the performance of active investment managers relative to appropriate benchmarks across asset classes over long periods. They consider six basic investment classes: core bonds; high-yield bonds; domestic large capitalization stocks; domestic small capitalization… Keep Reading

Do professional analysts systematically miss target prices for individual stocks? In the November 2013 draft of their paper entitled “Understanding and Predicting Target Price Valuation Errors”, Patricia Dechow and Haifeng You measure the errors in returns implied by professional stock analyst consensus price targets and examine the sources of these errors. They further investigate whether investors can… Keep Reading

How do professional analysts value stocks? In their March 2014 paper entitled “Peering Inside the Analyst ‘Black Box’: How Do Equity Analysts Model Companies?”, Andreas Markou and Simon Taylor examine the private stock valuation models of a group of analysts working in research departments of large investment banks. They examine both modeling methods and inputs…. Keep Reading