August 25, 2014

What I am reading: 8/25/2014

Recent articles that I found interesting and made me think.


VIX-Adjusted Momentum

The addition of many small details can make a big difference in seemingly simple strategies. I often like to use cooking analogies, and so I like to think of tomato sauce as a classic example: it contains few ingredients and is simple to make but difficult to master without understanding the interaction between components. Trend-following strategies are no different: anyone can create a simple strategy, few can master the nuances.


Do Risk-Adjusted Returns Matter?

The firm’s latest piece looks at smart beta and a host of factor investing data. One factor they looked into was the small cap anomaly. Past research has shown that small cap stocks have outperformed large cap stocks over longer time frames. Research Affiliates determined that this actually isn’t the case:


The Remarkable Truth about 52-Week High Stocks

On Wall Street, there are many highly publicized metrics that can trigger an emotional response in investors. The “52-week high” signal is a great example. It is a widely reported (e.g., Barron’s, WSJ, MarketWatch) and easily noticed statistic. Stocks at 52-week highs are at their peak versus historical values, and this is, presumably, valuable information. Also, peaks per se are salient, almost by definition, and so we tend to pay a lot of attention to them.


The Market Has Not Seen a Strong Up Day for Longer Than It Has Not Seen a Strong Down Day

Older post. We have recently seen the 2% down day but not a 2% up day.

It is a fact that the S&P 500 hasn’t had a -2% drop in the last 68 days but it also hasn’t had a 2% rise for 193 days. The market has given bears plenty of room to escape.




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