The theme of rebalancing in longer-term investing is neglected but important as it influences the overall portfolio’s performance and risk. Unfortunately, many investors are inconsistent in choosing dates for their rebalances of portfolios, resulting in hardly predictable results (whether positively or negatively affecting it), and not contributing to handling risk management properly. The following article presents our analysis of the impact of rebalancing on portfolio returns. It also serves as an introduction to the methodology for an upcoming Quantpedia Pro report that our users would be able to use to quickly assess the impact of the rebalancing period on any selected combination of trading strategies, custom equity curves, and ETFs.

Life is not always rosy; many tragedies and unexpected events hurt individuals and society. While some are hardly avoidable, such as natural disasters, some others as wars, are generally only functions of hate and greed. In the case of predictable events, risk measures can be employed, but unexpected outbreaks of aggression can hardly be hedged across the spectrum of different financial assets. We had previously touched on a similar topic and looked at some historical geopolitical shocks and price reactions around that time. Now, we would like to do a short review of an interesting 140-page paper by Dat Mai and Kuntara Pukthuanthong (2022), which, while not providing actionable strategy, provides insightful retrospection and takes war topic modeling to the higher level, covering developing narratives and influence factors extensively.

We have brought attention to the importance of evaluating factors models in different market regimes, and now, we will take a closer look at the size factor. Size [SMB (small minus big)] factor is a popular investment choice for asset investigation by many portfolio managers worldwide. The Size earned prominence in Fama and French’s three and five-factor models, and enjoy the continued discussion about its place in today’s portfolio construction. But it’s crucially important for investors seeking to capture the Size premium to realize that it is dependent on the monetary policy being pursued by the Federal Reserve, as the monetary easing seems to induce a Size premium.

Cryptocurrencies are a very controversial asset class. Some people may hate it, others may glorify it, and a significant part may ignore it. But what’s the opportunity cost of complete ignorance? Are we able to numerically calculate it? That’s a hard question that Duchin, Solomon, Tu, and Wang tried to answer in their recent paper, and we will take a look at some of their findings and discuss it.

Environmental, social, and governance (ESG) investing is rapidly growing in popularity. As more investors grow interested in the ESG investing, the funds theoretically have more reason to highlight their engagement with the ESG-related activities. In the research paper by Andrikogiannopoulou et al. (2022), authors first use textual analysis to assess how and how much the funds talk about ESG-related topics in their prospectuses, and then they compare this measure with the funds’ actual ESG engagement. The discrepancy between the words in their prospectus (high rate of mentioning ESG investing-related topics) and the fund’s acts (not being as green as illustrated in the prospectus) allows the authors to identify the greenwashing funds and take a closer look at their performance.

Dear readers & clients,

The beginning of the new year is usually a traditional time for recapitulation. The year 2022 was a really challenging one on the financial markets, filled with unexpected events (Russia’s invasion of Ukraine or surge in inflation etc.). But I am again really proud of my whole team for their work as we continue fulfilling our primary mission to process academic research related to quant&algo trading to a more user-friendly form.

Last year was again really productive…