What is the best stock pairs trading method? In their June 2015 paper entitled “The Profitability of Pairs Trading Strategies: Distance, Cointegration, and Copula Methods”, Hossein Rad, Rand Kwong Yew Low and Robert Faff compare performances of...
There are many leveraged exchange-traded funds (ETF) designed to track multiples of short-term (daily) changes in popular indexes. Over longer holding periods, these ETFs tend to veer off track. The cumulative tracking error can be large. How...
Is it misleading to view factor risk premiums (such as for market, size and value) as constant over time? In his June 2015 paper entitled “Dynamic Risk Premia and Asset Pricing Puzzles”, Andy Jia-Yuh Yeh generates time-varying (dynamic) risk premiums for...
Which works best, strategies comparing past returns among assets (relative or cross-sectional) or strategies requiring positive past raw/excess returns (intrinsic or absolute or time series)? In their May 2015 paper entitled “Cross-Sectional and Time-Series Tests of...
How far can a fund manager squeeze turnover while still maintaining an effective low-volatility portfolio? In his June 2015 paper entitled “Low Turnover: a Virtue of Low Volatility”, Pim van Vliet investigates the lower limit of turnover for...
What is the best scheme over the long run for identifying U.S. stock market trends? In the May 2015 version of his paper entitled “Market Timing With a Robust Moving Average”, Valeriy Zakamulin isolates the most robust moving average weighting...
“Simple Asset Class ETF Value Strategy” (SACEVS) tests a simple relative value strategy that each quarter allocates funds to one or more of the following three asset class exchange-traded funds (ETF), plus cash, based on degree of undervaluation...
...commodity futures in aggregate offer a long-term return comparable to that of stocks, with less downside risk and a substantial diversification benefit for a stock/bond portfolio.
What are the most pressing systematic weaknesses in financial research, and how should the investment community address them? In the May 2015 version of his article entitled “The Future of Empirical Finance”, Marcos Lopez de Prado identifies three...
Are there intractable weaknesses of historical inference as a tool to predict the behaviors of financial markets? In the May 2015 draft of his article entitled “Beyond Backtesting: The Historical Evidence Trap”, Ulrich Hammerich briefly describes four weaknesses of backtesting more difficult...
Is there strong evidence for price momentum within and across all major asset classes over the long run? In the May 2015 version of their paper entitled “215 Years of Global Multi-Asset Momentum: 1800-2014 (Equities, Sectors,...
Can investors exploit stock repurchase and issuance activity to predict market reaction to the next firm earnings release? In the May 2015 version of their paper entitled “Are Earnings Predictable?”, Shahram Amini and Vijay Singal test...
Smart beta strategies weight stocks according to one or a few historically predictive factors such as value, size, momentum or volatility rather than market capitalization. What are the cautions for investing in smart beta funds? In their...
Do factors that predict returns in U.S. stock data also work on global stock markets at the country level? In the May 2015 version of their paper entitled “Do Quantitative Country Selection Strategies Really Work?”, Adam...
Is intermediate-term asset class momentum a useful way to generate inputs (return, volatility and correlation forecasts) for a multi-class mean-variance optimization strategy? In their May 2015 paper entitled “Momentum and Markowitz: a Golden Combination”, Wouter Keller, Adam...
What is the best way to do asset price trend analysis? Two recent papers address this question. In the May 2015 version of their paper entitled “Which Trend is Your Friend?”, Ari Levine and Lasse Pedersen...
Does the interaction of paradigmatic indicators of optimism (lumber demand) and pessimism (gold demand) tell investors when to take risk and when to avoid risk? In their May 2015 paper entitled “Lumber: Worth Its Weight...
What is the best way to implement a value strategy for U.S. stocks? In their May 2015 paper entitled “Optimizing Value”, Ran Leshem, Lisa Goldberg and Alan Cummings investigate how the choice of value metric and implementation approach affect...
Are there gradual steps toward a fundamental stock index that work just as well? In their April 2015 draft paper entitled “Decomposing Fundamental Indexation”, Gregg Fisher, Ronnie Shah and Sheridan Titman compare fundamental indexing strategies to strategies that tilt...
Are mutual fund managers whose holdings deviate most from their benchmarks the best performers? In their April 2015 paper entitled “Deactivating Active Share”, Andrea Frazzini, Jacques Friedman and Lukasz Pomorski investigate whether Active Share is a reliable indicator of future...
In the introduction to their 2015 book entitled Invest with the Fed: Maximizing Portfolio Performance by Following Federal Reserve Policy, authors Robert Johnson, Gerald Jensen and Luis Garcia-Feijoo state: “Our purpose in writing this book is to...
Can currency carry traders improve performance by excluding “bad” currencies? In the April 2015 version of their paper entitled “Good Carry, Bad Carry”, Geert Bekaert and George Panayotov investigate the differences between good and bad carry trades...
Can investors amplify stock return momentum by screening past winners and losers based on return skewness? In their April 2015 paper entitled “Expected Skewness and Momentum”, Heiko Jacobs, Tobias Regele and Martin Webee explore the interaction of...
What is the best approach for measuring extreme loss risk? In their April 2015 paper entitled “Why Risk Is So Hard to Measure”, Jon Danielsson and Chen Zhou analyze the robustness of standard extreme loss risk analysis...
When does value investing work and how does it work best? In the April 2015 initial draft of their paper entitled “Fact, Fiction, and Value Investing”, Clifford Asness, Andrea Frazzini, Ronen Israel and Tobias Moskowitz address areas of confusion about value investing....