Tactical Asset Allocation Research

Betting on a Short Squeeze as Investment Strategy

Short squeezes are often associated with a large positive jump in the price of a stock. Filippou, Garcia-Ares, and Zapatero demonstrated that skewness-seeking investors try to identify securities that could experience a short squeeze in the near future and are willing to pay a premium for them. That results in an overvaluation of the options and, on average, negative returns. Investors are best served to avoid investments with lottery-like distributions. One way to do that is to turn a blind eye to social media sites like Robinhood and Reddit so you don’t get caught up in the hype and excitement. That’s another example of why retail investors are called “dumb money.” Forewarned is forearmed.

DIY Trend-Following Allocations: March 2024

Full exposure to domestic equities. Full exposure to international equities. Partial exposure to REITs. No exposure to commodities. Partial exposure to intermediate-term bonds.

The Temptation of Factor Timing

The timing of equity factor premiums has a strong allure for investors because academic research has found that factor premiums are both time-varying and dependent on the economic cycle.

Implications of Regime-Shifting Stock-Bond Correlation

The correlation between stocks and bonds should be a critical component of any asset allocation decision, as it impacts not only the overall risk of a diversified multi-asset class portfolio but also the risk premia one should expect to receive for taking risk in different asset classes. The problem for investors is that the correlation between stocks and bonds fluctuates extensively across time and economic regimes.

Global Factor Performance: September 2023

The following factor performance modules have been updated on our Index website.[ref]free access for financial professionals[/ref] Standardized Performance Factor Performance Factor Exposures Factor Premiums Factor Attribution [...]

DIY Trend-Following Allocations: August 2023

Full exposure to domestic equities. Full exposure to international equities. Partial exposure to REITs. Partial exposure to commodities. No exposure to intermediate-term bonds.

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