Do Option Prices Inform Stock Returns?
In perfectly efficient markets, option prices should not convey any new information or contribute to the price discovery of underlying assets. However, if markets are [...]
Trading Costs Wipe Out the Overnight Return Anomaly
At least once a year, the press and Twittersphere propagate the mistaken idea that investors can earn excess returns by buying the S&P 500 at [...]
Order Flow Correlation May Imply Momentum Factor Crowding
Zooming In on Equity Factor Crowding Valerio Volpati, Michael Benzaquen, Zoltán Eisler, Iacopo Mastromatteo, Bence Tóth, and Jean-Philippe BouchaudWorking Paper, SSRNA version of this paper [...]
Counterpoint: ETF Activity May Make the Stock Market MORE Efficient
Lawrence Glosten, Suresh Nallareddy, and Yuan ZouManagement Science, forthcomingA version of this paper can be found hereWant to read our summaries of academic finance papers? Check [...]
Do Interest Rates Explain Value’s Underperformance?
From January 2017 through March 2020, the value premium, defined by HML (the return of high book-to-market stocks minus the return of low book-to-market stocks [...]
Is value dead? Has the story changed? No.
Is (systematic) Value Investing Dead? Ronen Israel, Kristoffer Laursen and Scott RichardsonWorking Paper, published at aqr.comA version of this paper can be found hereWant to read [...]
Smart(er) Investing – The Easy Way
Most of the time we make you "earn your education" by reading our posts to build up your knowledge of the latest and greatest academic [...]
Tactically Adjusting Everything in a Financial Crisis? Bad Idea.
Flight to Quality and Asset Allocation in a Financial Crisis Terri Marsh and Paul PfleidererFinancial Analyst Journal, 2013A version of this paper can be found here [...]
Foreign Dividend Withholding Tax Refunds: A Practical Walkthrough
The world of withholding tax recovery on foreign dividends and interest is woven with intricacies, challenges, and a general lack of transparency. This is mainly [...]
Trend Following the S&P 500? Some Practical Advice
BREAKING INTO THE BLACKBOX: Trend Following, Stop Losses, and the Frequency of Trading: the case of the S&P500 Andrew Clare, James Seaton, Peter N. Smith, [...]
Machine Learning and Investing: Forecasting Fundamentals w/ Ensembles
Quantitative factor portfolios generally use historical company fundamental data in portfolio construction. The key assumption behind this approach is that past fundamentals proxy for elements [...]
Skulls, Financial Turbulence and Risk Management
Mark Kritzman and Yuanzhen LiFinancial Analyst Journal, 2010A version of this paper can be found hereWant to read our summaries of academic finance papers? Check out [...]
Cheap vs. Expensive Factors: Does Valuation Matter for Future Returns?
Tesla (TSLA) breached the $100 billion market capitalization in January 2020 and became the most valuable car manufacturer globally. However, valuing the company is challenging [...]
Why Passively Investing in Active Methods May Not Work.
Are Passive Investing Techniques Efficient for Active Strategies? David BlitzJournal of Portfolio ManagementA version of this paper can be found hereWant to read our summaries of [...]
Ways to Measure Extreme Downside Risk
Richard D.F. Harris , Linh H. Nguyen and Evarist Stoja Journal of International Financial Markets, Institutions, and Money, 2019A version of this paper can be [...]
Trend Following is Everywhere
Similar to some better-known factors, such as size and value, time-series momentum (TSMOM) historically has demonstrated abnormal excess returns. For the less familiar with trend [...]
Estimating Pandemic Economic Costs for “Face-to-Face” Businesses
Business disruptions from social distancing Miklós Koren and Rita PetoCovid Economics, Center for Economic Policy ResearchA version of this paper can be found hereWant to read [...]
Dividends, Stock Prices, and Inflation.
Building on the concepts presented in my Dividends Are Different article, here we present data and observations highlighting the relationship between inflation and 1) company [...]
Is There a Tail Risk Premium in Stocks?
It has been well documented both that stock returns have much fatter tails than a normal distribution would generate, and that tail events occur much [...]
Trend Following Reality: You Need Trends to Trend-Follow
You Can't Always Trend When You Want Abhilash Babu, Brendan Hoffman, Ari Levine, Yao Hua Ooi, Sarah Schroeder and Erik Stamelos The Journal of Portfolio Management, March 2020A version of this [...]