Investing Research Articles

Are January returns important to the profitability of short-term reversal, intermediate-term momentum, long-term reversion and 12-month echo trading strategies? In her December 2010 paper entitled “Momentum, Seasonality and January”, Yaqiong Yao investigates the role of  January returns within these previously discovered anomalies. The study’s core methodology is to reform equally weighted hedge portfolios each month… Keep Reading

Can investors straightforwardly diversify equity portfolios with volatility futures? In the January 2011 draft of their paper entitled “The Hazards of Volatility Diversification”, Carol Alexander and Dimitris Korovilas explore the potential benefits and costs of combining ‘buy-and-hold’ positions in volatility futures with a long-term equity portfolio. Specifically, they examine diversification of long exposure to the… Keep Reading

Does the concept of an idealized fixed business cycle help predict stock market returns? In his recent paper entitled “Forecasting 2011 Using U.S. Precedents: A Simple Analysis of Equity Market Performance”, Thomas Hall examines the performance of major U.S. stock market indexes at fixed intervals after business cycle troughs and extrapolates results to predict U.S…. Keep Reading

Do mutual fund investors in aggregate exhibit good, bad or indifferent market timing? In their January 2011 article entitled “Past Performance is Indicative of Future Beliefs”, Philip Maymin and Gregg Fisher investigate how the aggregated timing of buying and selling by mutual fund investors affects their average returns. Using monthly returns and assets for approximately… Keep Reading

Are there stock/firm characteristics that usefully predict which stocks will exhibit extreme returns? In their January 2011 paper entitled “Predicting Extreme Returns and Portfolio Management Implications”, Kevin Krieger, Andy Fodor, Nathan Mauck and Greg Stevenson investigate the predictability of extreme returns for individual stocks and the practical import of such predictability for investment portfolios. The… Keep Reading

What approach to diversifying equity holdings across industries and global geographies is most sensible? In the October 2010 version of his paper entitled “Assessing Alternative Global Equity Investment Frameworks”, Xi Li compares the feasibility and optimality of eight possible approaches for grouping of stocks by geography and industry/sector. He compares feasibility of diversification grouping approaches… Keep Reading

Do variations in the Baltic Dry Index (BDI), a weighted average of the Baltic Exchange shipping cost indexes for the four largest dry-vessel classes, serve as an early measure of global demand for raw materials and thereby predict asset class returns? In the January 2011 version of their paper entitled “The Baltic Dry Index as… Keep Reading

In his 2011 book The Power of Passive Investing: More Wealth with Less Work, author Richard Ferri presents “the detailed studies and undeniable evidence favoring a passive investing approach. …This information clearly shows that trying to beat the market has never been a reliable investment strategy in the past, and there’s no reason to believe… Keep Reading

Do changes in the level of futures markets activity predict returns for corresponding asset classes? In their January 2011 paper entitled “What Does Futures Market Interest Tell Us about the Macroeconomy and Asset Prices?”, Harrison Hong and Motohiro Yogo relate futures markets open interest (the number of contracts outstanding) to future asset class returns. They… Keep Reading

Does hedge fund outperformance derive from systematically superior timing or from superior asset selection? In the December 2010 version of her paper entitled “Can Factor Timing Explain Hedge Fund Alpha?”, Hyuna Park decomposes alpha generated by hedge funds into security selection and timing with respect to eight risk factors (including U.S. and emerging equity risk… Keep Reading