Investing Research Articles

Do allocations aimed at managing volatility beat simple equal weighting as applied to the cheapest third of 32 country stock markets based on 10-year cyclically adjusted price-to-earnings ratio (CAPE, or P/E10). In their October 2012 paper entitled “Global CAPE Model Optimization”, Adam Butler, Michael Philbrick, Rodrigo Gordillo and Mebane Faber compare the following six volatility management strategies… Keep Reading

Do investors under stress herd, thereby driving return correlations upward? In their October 2012 paper entitled “Quantifying the Behavior of Stock Correlations Under Market Stress”, Tobias Preis, Dror Kenett, Eugene Stanley, Dirk Helbing and Eshel Ben-Jacob relate average stock return correlations to stock market conditions with focus on dramatic market losses. Specifically, they calculate the average Pearson… Keep Reading

Do low-volatility stocks outperform high-volatility stocks around the globe? In their October 2012 paper entitled “Stock Return Volatility, Operating Performance and Stock Returns: International Evidence on Drivers of the ‘Low Volatility’ Anomaly”, Tanuj Dutt and Mark Humphery-Jenner investigate links among stock return volatility, stock returns and firm operating performance in emerging and developed markets outside North America…. Keep Reading

What is the most important aspect of long-term investing? In the July 2012 version of his paper entitled “Strategic Asset Allocation and Portfolio Performance”, Lujer Santacruz assesses the importance of strategic asset class allocation compared to other sources of returns for a set of Australian managed funds. He specifies three fund return components as: (1) strategic allocation,… Keep Reading

Does modeling gold price relationships with other variables based on entire distributions differ from that based only on distribution means? In their May 2012 paper entitled “Is Gold Overpriced?”, Lingjie Ma and George Patterson apply a quantile regression model (considering effects across the distribution) to investigate long-run relationships between the price of gold and various economic… Keep Reading

Which equity markets worldwide offer the best reward-to-risk ratios? In their October 2012 paper entitled “Risk-Adjusted Performances of World Equity Indices”, Yigit Atilgan and Ozgur Demirtas investigate whether 52 developed and emerging market equity indexes compensate investors equally based on reward-to-risk ratios. They consider three reward-to-risk ratios: (1) conventional Sharpe ratio based on monthly return and… Keep Reading

How does the risk parity asset allocation strategy (equalizing the volatility contributions of portfolio components) fare in comparison to other commonly used strategies? In their March 2012 research note entitled “The Risk Parity Approach to Asset Allocation – Climbing the Wall of Worries?”, Fabian Dori, Frank Haeusler, Manuel Krieger, Urs Schubiger and David Stefanovits contrast three… Keep Reading

Which asset class best hedges inflation? In the September 2012 draft of his book chapter entitled “‘Real’ Assets”, Andrew Ang examines the behaviors of the following assets commonly thought to hold their value during times of high inflation (“real” assets): inflation-linked bonds, commodities, real estate and U.S. Treasury bills (T-bill). He focuses on inflation as… Keep Reading

…limited evidence indicates that daily presidential election polling data have very little or no effect on returns for the broad stock market.

“Market Capitalization Concentration as Stock Market Predictor” summarizes research finding that the change in the level of concentration of total market capitalization in the largest firms may be a useful predictor of stock market returns. Does a simple trading strategy based on this finding beat the market? To investigate, we examine the ratio of the S&P… Keep Reading