Why is carry doing so well? How did this convergent strategy end up benefiting from one of the biggest geopolitical shocks in modern times? By examining this question, investors will be better informed about how to build better portfolios and whether carry should have a strategic slice of the portfolio pie.
Trend following is finally moving while U.S. stocks are flat. And so—like with most assets or strategies that post strong returns—investors may be eyeing this particular strategy and asking: Is it time to get in? The answer, while not surprising, is definitely nuanced.
Handy and Meksi provided a clear warning: relying on past performance to select CTAs is a strategy fraught with risk, largely due to behavioral biases that distort our perception of skill and persistence. For investors, the lesson is to stay humble, diversify, and focus on robust processes rather than chasing yesterday’s winners.
Trend following, at its core, is a strategy where investors buy an asset when it's going up and sell when it’s going down. But unlike panic-driven investors who sell at the worst possible moment, trend followers adhere to a rules-based approach in an attempt to remove emotion from the equation.
Who among us wouldn't want to be the savior that predicts a market crisis and saves our clients from losses in capital -- or even better -- profits from them? A central topic of interest for academics is whether there are more precise tools to predict financial crises. Those who believe so dedicate their efforts to finding early warning indicators.
Pathetic Protection: the Elusive Benefits of Protective Puts Roni IsraelovJournal of Alternative Investments, Winter 2019A version of this paper can be found hereWant to read our summaries of academic [...]
Seven Centuries of Commodity Reversals Adam Zaremba, Robert Bianchi, and Matuesz MikutowskiA version of this paper can be found here. What are the research questions? As [...]
An often-overlooked corner of the investing world is the futures market. Maybe it’s the fear of taking delivery of 1,000 barrels of oil, the mechanics [...]
Similar to some better-known factors like size and value, time-series momentum is a factor which has historically demonstrated above-average excess returns. Time-series momentum, also called [...]
Andrew Miller, a regulator contributor to the blog, is passionate about the intersection of academic finance research and financial planning. We obviously love the academic [...]
Skewness is a statistical measure of how returns behave in the tails of a probability distribution. Wikipedia has a more robust definition of skewness with [...]
If you couldn't tell from our recent monster commodity futures post, we've been thinking a lot about futures recently. The futures research area is relatively "fresh," and [...]
Commodity futures investing is arguably the most misunderstood asset class in the financial marketplace. We want to change that state of affairs. Commodity futures strategies are [...]
There is a new paper published in the Journal of Financial Markets that digs a bit deeper into the Moskowitz, Ooi, and Pedersen "Time Series [...]
In my two previous blog posts (here and here), I analyze the performance of bonds during really bad months for US stocks (“Crisis Alpha” months), [...]
Unlike equity and bond investing, investing in commodities is a less familiar undertaking for many. Commodities behave differently than stocks and bonds, pose different risks, [...]
This past year we examined the possibility of replicating commodity exposure via equities. The project was spurred by an insightful research report from MSCI, which showed some [...]
Facts and Fantasies About Commodity Futures Ten Years Later Gorton and Rouwenhorst (2006) examined commodity futures returns over the period July 1959 to December 2004 [...]
We investigate various methods to express a 10-Year Treasury Bond allocation. The primary issue with Treasury Bonds is their lack of tax-efficiency. T-bond income (and [...]
As many investors know, Eugene Fama developed the efficient-market hypothesis (EMH) at the University of Chicago in the 60s, and it subsequently flourished across academia. [...]
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