This paper singles out the key roles of US equity skewness and kurtosis in the hedge fund return generating process. We propose a conditional higher‐moment model with location, trading, and higher‐moment factors to describe the dynamics of the equity hedge, event‐driven, relative value, and

Momentum Crash Management (Mahdi Heidari) The Risk Anomaly Tradeoff of Leverage (Baker and Wurgler) 3 Factor Dual Momentum: Value, Momentum and Low Volatility (RRSP Strategy) Tactical Asset Allocation - Research Review (The Capital Spectator)

Rebalance frequency affects value and quality factors in different ways: Value works better when assessed more frequently Quality factors work about the same, regardless of frequently. Other important findings: Value portfolios outperform the market, historically. Quality portfolios perform inline

We recently examined a handful of metrics related to S&P 500 valuations. P/E P/B TEV/EBITDA TEV/FCF TEV/GP Details on these metrics can be found here. Let's look at the high level summary as of Februa

A target price forecast scaled by current price provides the analyst’s assessment of the implied return to that stock over the stated forecast horizon. Using a simple valuation framework, we show that implied returns are a function of the expected dividend distribution, analysts’ private

We study whether commonly analyzed equity return predictors also predict corporate bond returns. Bond markets do price risk, but also are susceptible to delayed information transmission relative to equities. Specifically, equity market capitalization and firm profitability negatively predict bond

Existing studies show that firm asset and investment growth predict cross-sectional stock returns. Firms that shrink their assets or investments subsequently earn higher returns than firms that expand their assets or investments. I show that the superior returns of the low asset and investment

Manager Selection (Scott Stewart) Measuring the Size Effect with Capitalization-based ETFs (CXO Advisory) Asymmetric Reporting (Armstrong, Taylor and Verrecchia) The Piotroski F Score in the Australian Market: Performance & Fundamental Drivers (Charles Hyde) How Often Should You Take Tactical

This study sought to disentangle the effects of size and whether there are size and momentum effects on Jordan firm returns. Initial findings showed that size effect has important role in explaining returns. For momentum effect, while in general there is no momentum effect in Jordan firm market, the

The nation's recent financial crisis brought into sharp relief fundamental questions concerning the social function and purpose of the financial system, including its relation to the "real" economy. This Article argues that, to answer these questions, we must recapture a distinctively

Momentum in firm fundamentals, i.e., earnings momentum, explains the performance of strategies based on price momentum. Earnings surprise measures subsume past performance in cross sectional regressions of returns on firm characteristics, and the time-series performance of price momentum strategies

We examine the causal effect of limits-to-arbitrage on ten well-known asset pricing anomalies using Regulation SHO as a natural experiment. We find that asset pricing anomalies become weaker on portfolios constructed with pilot stocks during the pilot period. The effect is both statistically and

Understanding Options-Based Sentiment in the Stock Market (Traderfeed) What Do Accruals Tell Us About Future Cash Flows? (Barth, Clinch and Israeli) Look for People, Not for Alpha: Mutual Funds Success and Managerial Intellectual Capital (Naidenova, Parshakov and etal) Financial Education, Literacy

Barry has a nice piece in the Washington Post asking a simple question: What is the best valuation metric to assess if a stock is cheap or expensive? Jack and I were honored to see that Barry highlighted our 2013 Journal of Portfolio Management paper: Analyzing Valuation Measures: A Performance

Contrary to basic finance principles, high-beta and high-volatility stocks have long underperformed low-beta and low-volatility stocks. This anomaly may be partly explained by the fact that the typical institutional investor’s mandate to beat a fixed benchmark discourages arbitrage activity in

We were recently passed along an article suggesting that valuation spreads, or the spread in a valuation metric across the most expensive and least expensive stocks, matters for timing investments. We take this concept one step further and investigate if valuation spreads can help us time value and

The market is off to a rough start again today. ES has the potential to leave an unfilled gap down for the 2nd day in a row. This is a fairly rare thing to see happen, but is has often been followed by a gap up the next morning. This can be seen in the study below. 2015-03-04 image2 The stats here

What is Social Data? (MKTSTK) A Model of Cognitive Dissonance and Information (Matthew Kovach) Insider Trading in Commodities Markets (Andrew Verstein) New Asset Pricing Factors and Expected Bond Returns (Franke, Muller and Muller)

Investors have been worrying, at least for the last several years, that the market is overvalued. By some measures this is undoubtedly true. Just yesterday we highlighted that the Shiller CAPE is in the 94th percentile as of 1/31/2015. And as valuations have gone higher, the alarm bells in the press

As many are aware, economists aren't the funniest group in the crowd. Here are some sample jokes from the funniest economists out there--Yoram Bauman. Here is a sample economist joke: When Yorum told his dad that he wanted to use his Ph.D. in economics as the basis for a comedy career, his dad

We show that aggregate short interest is one of the strongest known predictors of the equity risk premium. High aggregate short interest predicts lower future equity returns at monthly, quarterly, semi-annual, and annual horizons. In addition, aggregate short interest outperforms a host of popular

An R Tutorial for Microsoft Excel Unsers (Revolutions) Backtesting A Basic ETF Rotation System in Excel (System Trader Success) Regulating CEO Narcissism (Bodt, Bollaert, and etal) Value, Momentum and market Timing (Filippou and Garcia-Ares) Speed of Information Diffusion

Our DO-IT-YOURSELF Investing Tool is Live! You can build your own stock selection and asset allocation models using our DIY Investing tools. How to Access the Tool? Step 1: Click "Our tools" tab from our main website page.

Our Asset Allocation Backtesting Tool is Live! You can build and backest your own allocation portfolio using our "Allocation Architect" tool. How to Access the Tool? Step 1: Click "Our tools" tab from our main website page. 1.1 Click to enlarge. Step 2: If you already have a

US News laundry lists their top 10 "Value Investing Funds," or Value Investing ETFs, in their recent article: http://money.usnews.com/funds/etfs/rankings/value-funds The criteria (and weighting) for selecting so-called "Value" ETFs are outlined below: Expense Ratio (30%) Tracking

Executive Summary: Dual Momentum, a concept pioneered by Gary Antonacci, intelligently combines elements of two types of momentum investing strategies -- absolute and relative momentum -- into a comprehensive asset allocation system. His paper shows that the combination of time-series momentum and

We decompose the abnormal profi…ts associated with well-known patterns in the cross-section of expected returns into their overnight and intraday components. We show that, on average, all of the abnormal returns on momentum strategies remarkably occur overnight while the abnormal profi…ts on the

The primary driver of long-horizon wealth is expected returns. Why would you invest in anything but stocks? Why isn’t your portfolio 100% stocks? Do you believe stocks are going to have the highest return? By the way, stocks have averaged 10% a year for a long period of time. Bonds have averaged

nvestors trying to make decisions on how to invest their savings face many complications that are frequently ignored in research papers on asset allocation. Often, it is assumed that a fixed lump sum of money is invested. But this is rarely the case in real world investing for the individual

Based on psychology theory, we propose that intuition can be a key element stimulating auditor skepticism, whereas overreliance on analytical processing can overwhelm auditors’ intuition thereby reducing skepticism. We test our expectations with an experiment containing responses from 85 senior

Some mutual funds purchase stocks before dividend payments to artificially increase their dividends, which we call "juicing." Funds paid more than twice the dividends implied by their holdings in 7.4% of fund-years examined. Juicing is associated with larger inflows, and is more common

We examine whether the predictability of future returns from past returns is due to the market's underreaction to information, in particular to past earnings news. Past return and past earnings surprise each predict large drifts in future returns after controlling for the other. Market risk,

We use a large recent sample of Form 4 insider trading filings to provide evidence on the process through which SEC filings are disseminated via EDGAR. We find that while the delay from a filing’s acceptance by EDGAR to its initial public availability on the SEC website is relatively short, with a

We examine the relation between a measure of male CEOs’ facial masculinity and financial misreporting. Facial masculinity is associated with a complex of masculine behaviors (including aggression, egocentrism, risk-seeking, and maintenance of social status) in males. One possible mechanism for

Readers, I need your input for a research project. http://smeal.qualtrics.com/SE/?SID=SV_0JKTpsCsXIXnJ9H As many of you are aware, my primary passion is serving as the team leader for Alpha Architect. That said, I still conduct "serious" academic research with various colleagues in my

This study shows that the recent trajectory of a firm’s profits predicts future profitability and stock returns. The predictive information contained in the trend of profitability is incremental beyond that provided by the profit level, and it is not subsumed by other well-known determinants of

Strategies employing Risk Parity have been favored by mutual funds and other market participants the past few years. The attraction of risk parity strategies is the great story associated with the approach and the historical performance over the past 30 years has been favorable. However, there is an

Eric Falkenstein is an economist, with a PhD in economics, a quantitative geek, and a book writer. In his blog, Falkenblog, there are voluminous mind-blowing articles since 2008, which definitely worth your time to read. Recently he posted an article about the history of Low Volatility Investing and

We study the joint determination of fund managers' contracts and equilibrium asset prices. Because of agency frictions, investors make managers' fees more sensitive to performance and benchmark performance against a market index. This makes managers unwilling to deviate from the index and

This paper empirically studies how the interaction between short-term investors and analyst recommendations is related to a speculative component in stock prices. Using a new measure of the holding duration of institutional investors (called Stock Duration), we document that frequently traded stocks

Hi everyone! I am happy to announce that our book shipment has arrived and Quantitative Value is back on the market at $19.99! We ordered 760 copies, but our daily sales have really accelerated as of late, so don't wait to grab a copy. David wasn't smiling this much when we were hand

Predictable variation in equity returns might reflect either (1) predictable changes in expected returns or (2) market inefficiency and stock price "overreaction." These explanations can be distinguished by examining returns over short time intervals since systematic changes in fundamental

Financial intermediaries trade frequently in many markets using sophisticated models. Their marginal value of wealth should therefore provide a more informative stochastic discount factor (SDF) than that of a representative consumer. Guided by theory, we use shocks to the leverage of securities

Research in experimental psychology suggests that, in violation of Bayes' rule, most people tend to “overreact” to unexpected and dramatic news events. This study of market efficiency investigates whether such behavior affects stock prices. The empirical evidence, based on CRSP