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...
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,...
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...
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...
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...
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...
Do annual stock market swing returns swing around their average like a pendulum? In the November update of his 2022 paper entitled “Periodic Structure of Equity Market Annual Returns and Their Predictability”, Daniel Pinelis investigates...
Below is a weekly summary of our research findings for 11/21/22 through 11/25/22. These summaries give you a quick snapshot of our content the past week so that you can quickly decide what’s relevant to...
Based on high return correlation with the S&P 500 Index and strong past performance of the health care sector, a subscriber suggested replacing SPDR S&P 500 ETF Trust (SPY) with iShares U.S. Healthcare ETF (IYH)...
In response to the U.S. stock market timing backtest in “Usefulness of P/E10 as Stock Market Return Predictor”, a subscriber suggested combining a 10-month simple moving average (SMA10) technical signal with a P/E10 (or Cyclically...
Does breadth of equity sector performance predict overall stock market return? To investigate, we relate next-month stock market return to sector breadth (number of sectors with positive past returns) over lookback intervals ranging from 1...
A subscriber suggested implementing several Simple Asset Class ETF Momentum Strategy (SACEMS) asset class proxies with allocations consisting of one third triple-leveraged (3X) versions of the proxies and two thirds cash, thereby accruing the targeted...
Below is a weekly summary of our research findings for 11/14/22 through 11/18/22. These summaries give you a quick snapshot of our content the past week so that you can quickly decide what’s relevant to...
Is option gamma, which indicates how aggressively option market makers must trade underlying stocks to hedge their option positions, a systematic driver of those stock returns? In his October 2022 paper entitled “Option Gamma and...
Below is a weekly summary of our research findings for 11/7/22 through 11/11/22. 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 the correlation between returns on stocks and bonds is elevated when inflation is above 5%, such that equities and fixed income offer little diversification protection. To investigate, we calculate the U.S....
In response to the U.S. stock market timing backtest in “Usefulness of P/E10 as Stock Market Return Predictor”, a subscriber suggested a modification for exploiting P/E10 (or Cyclically Adjusted Price-Earnings ratio, CAPE). Instead of binary...