Investing Research Articles

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 Swade, Sandra Nolte, Mark Shackleton and Harald Lohre analyze drivers of differences in performance between EW and VW U.S. stock… Keep Reading

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 your investing needs. Subscribers: To receive these weekly digests via email, click here to sign up for our mailing list.

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 Sharpe ratios? In their November 2022 paper entitled “Factor Returns and Out-of-Sample Alphas: Factor Construction Matters”, Hendrik Bessembinder, Aaron Burt… Keep Reading

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”, Mathias Hasler re-evaluates research published in academic journals on 92 stock return predictors by testing alternatives for 12 portfolio construction… Keep Reading

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 market value considering the slope of the demand curve for tradable assets. Based on the body of relevant research, he… Keep Reading

Does use of price data other than the first and last within a lookback interval improve performance of a stock momentum strategy? In their November 2022 paper entitled “Momentum Without Crashes”, Soros Chitsiripanich, Marc Paolella, Pawel Polak and Patrick Walker construct a momentum strategy that ranks stocks based on a weighting scheme using prices throughout… Keep Reading

A subscriber requested an update of April 2015 long-term tests of simple versions of the strategy described by Jason Kelly in The 3% Signal: The Investing Technique that Will Change Your Life. We start with a general strategy targeting an X% quarterly increase in a stock fund, as follows: Initiate X% rules with either 80%-20% or… Keep Reading

Below is a weekly summary of our research findings for 11/28/22 through 12/2/22. These summaries give you a quick snapshot of our content the past week so that you can quickly decide what’s relevant to your investing needs. Subscribers: To receive these weekly digests via email, click here to sign up for our mailing list.

Do stock borrowing fees (shorting costs) inherent in long-short strategies constructed to exploit stock return anomalies kill those anomalies? In their September 2022 paper entitled “Anomalies and Their Short-Sale Costs”, Dmitriy Muravyev, Neil Pearson and Joshua Pollet investigate effects of shorting costs on gross profits generated by published stock return anomalies. Since shorting costs are… Keep Reading

A subscriber, wondering if past returns unadjusted by dividends (capital gains/losses only) more accurately reflect relative momentum than dividend-adjusted returns, asked about performance of the Simple Asset Class ETF Momentum Strategy (SACEMS) with assets ranked by unadjusted returns. To investigate, we compare performance statistics for SACEMS Top 1, equal-weighted (EW) Top 2 and EW Top… Keep Reading