Is there an optimal net (incorporating trading frictions) trend-following strategy for broad stock portfolios? In their November 2022 paper entitled “Optimal Trend-Following With Transaction Costs”, Valeriy Zakamulin and Javier Giner develop and test a simple...
Below is a weekly summary of our research findings for 1/9/23 through 1/13/23. These summaries give you a quick snapshot of our content the past week so that you can quickly decide what’s relevant to...
Can investors make the stock return momentum effect stronger/more reliable by isolating stocks for which many similar stocks exhibit very strong or very weak past returns? In his December 2022 paper entitled “Neighbouring Assets”, Sina...
If a published theory is correct, its empirical results should hold for years after original test samples end. Are peer-reviewed, theory-supported (risk-based) academic studies of stock return predictors thereby superior to other streams of predictor...
Do stocks with high exposures to new technologies outperform? In her December 2022 paper entitled “New Technologies and Stock Returns”, Jinyoung Kim examines future returns of stocks with relatively high exposures to new technologies as...
A subscriber requested confirmation that a strategy of holding SPDR S&P 500 ETF Trust (SPY) at all times except options expiration week beats holding SPY all the time. To investigate, we look at holding SPY...
What is the critical success factor for experienced traders? In their December 2022 paper entitled “Strategic Sophistication and Trading Profits: An Experiment with Professional Traders”, Marco Angrisani, Marco Cipriani and Antonio Guarino compare results from...
Below is a weekly summary of our research findings for 1/3/23 through 1/6/23. These summaries give you a quick snapshot of our content the past week so that you can quickly decide what’s relevant to...
How should investors think about, and perhaps exploit, asset return volatility? In his December 2022 paper entitled “A Stylized History of Volatility”, Emanuel Derman reviews how generations of financial modelers have quantified volatility and ultimately...
A subscriber asked about the performance of a strategy that each month allocates funds to pairs of exchange-traded fund (ETF) asset class proxies according to the term spread, as measured by the difference in yields...
Do the widely used U.S. stock return factors exhibit long-term trend changes and shorter-term cyclic behaviors? In his November 2022 paper entitled “Trends and Cycles of Style Factors in the 20th and 21st Centuries”, Andrew...
Below is a weekly summary of our research findings for 12/27/22 through 12/30/22. These summaries give you a quick snapshot of our content the past week so that you can quickly decide what’s relevant to...
Do stocks that are winners or losers over multiple lookback intervals generate stronger future returns because they attract wider audiences of momentum investors? In their June 2022 paper entitled “Overlapping Momentum Portfolios”, Iván Blanco, Miguel...
Below is a weekly summary of our research findings for 12/19/22 through 12/23/22. These summaries give you a quick snapshot of our content the past week so that you can quickly decide what’s relevant to...
A subscriber requested evaluation of a strategy that seeks to exploit U.S stock market reversion after dips by temporarily applying margin. Specifically, the strategy: At all times holds the U.S. stock market. When the stock...
In response to a prior analysis (updated here), a subscriber asked whether adding a simple moving average (SMA) filter to “Simple Asset Class ETF Momentum Strategy” (SACEMS) assets, either before or after ranking them based...
Below is a weekly summary of our research findings for 12/12/22 through 12/16/22. These summaries give you a quick snapshot of our content the past week so that you can quickly decide what’s relevant to...
A subscriber asked whether currency exchange rates exhibit reliable seasonality that may be used to time equities (with a stronger currency implying lower asset prices). To investigate, we look for reliable calendar month effects for...
Are models based on advanced machine learning adept at predicting returns for individual emerging market stocks? In the November 2022 version of their paper entitled “Machine Learning and the Cross-section of Emerging Market Stock Returns”,...
Do monthly retail sales data reliably predict U.S. stock market behavior? To investigate, we relate monthly change in retail sales to monthly S&P 500 Index return. We consider both seasonally adjusted (SA) and non-seasonally adjusted...
Why do equal-weighted (EW) portfolios outperform their market capitalization-weighted, or value-weighted (VW), counterparts over multiple decades in various investment universes? In their November 2022 paper entitled “Why Do Equally Weighted Portfolios Beat Value-Weighted Ones?”, Alexander...
Below is a weekly summary of our research findings for 12/5/22 through 12/9/22. These summaries give you a quick snapshot of our content the past week so that you can quickly decide what’s relevant to...
Why do portfolios formed from the principal components of many long-short stock return factors from two recent studies, one covering 207 factors and the other 153 factors (with overlap 97), have such different out-of-sample gross...
Do test portfolio construction decisions in published research on stock return predictors impound bias by fitting the noise (capturing luck) in historical returns? In his November 2022 paper entitled “Looking Under the Hood of Data-Mining”,...
Is market capitalization, shares outstanding times share price, really the total value of a firm? In his brief November 2022 paper entitled “The Market Capitalization Illusion”, J.B. Heaton examines the relationship between market capitalization and...