Socially Responsible Investing (also called ESG Factor Investing) grows in popularity. More and more investors enter the stock market not just to invest their savings, but they are also want to support companies that bring positive social or environmental change. ESG factor investing can bring satisfaction to those investors. But does it also brings a real outperformance in a financial sense? Is there some ESG factor alpha? How big is it? These are some of the questions we have decided to investigate – we obtained data, identified ESG factor strategies and tested them. Feel free to explore them with us…

April was more business-as-usual month for Quantpedia team as eleven new Quantpedia Premium strategies have been added into our database, and six new related research papers have been included in existing Premium strategies during last month.

Additionally, we have produced 17 new backtests written in QuantConnect code. Our database currently contains over 270 strategies with out-of-sample backtests/codes.

Also, five new blog posts you may find interesting have been published on our Quantpedia blog:

Five new strategies have been added.

Three new related research papers have been included into existing strategy reviews. And three short free blog posts have been published during last few weeks.

Financial markets are full of pricing anomalies, and their existence is often explained by human behavior. Behavioral finance postulates that cognitive irrationality is manifested in biases like the disposition effect (the tendency of people to sell assets that have increased in value, but keeping assets that have dropped in value in portfolio) or overconfidence bias (the tendency of people to be more confident in their own abilities). There are some papers which directly link investment decision making caused by these biases to actual physiology of investors (for example, a known impact of testosterone on investment performance). A new research paper written by Nofsinger, Patterson, and Shank examines not only testosterone but also cortisol levels of testing subjects and then compares their performance in a mock investment contest. Both hormones are strongly related to higher portfolio turnover and inability to accept losses, with cortisol levels even more significant than testosterone.

Author: Nofsinger, Patterson, Shank

Title: On the Physiology of Investment Biases: The Role of Cortisol and Testosterone

Federal Open Market Committee meetings (aka FED meetings) have a significant influence on the number of different assets (see for example our article related to drift in equities during FED meetings). The main channel which FED uses to influence the US economy is the level of short term interest rates. Therefore, it’s not a surprise that FED meetings have influence also on long-term interest rates. But just how big? Bigger than most people think. We are presenting one interesting research paper written by Sebastian Hillenbrand, which shows that the whole secular decline in equity yields and long-term interest rates since 1980 was realized entirely in a 3-day window around FOMC meetings. Now, that’s called the influence …

Author: Hillenbrand

Title: The Secular Decline in Long-Term Yields around FOMC Meetings

Quantpedia’s main goal is and always has been to help our readers to navigate in the ocean of academic research related to systematic investment strategies and quant trading. Our main product offering, the Quantpedia’s Premium database of algo/quant/systematic trading strategies, is tailored to an advanced audience.

But we also have readers who are complete beginners or aspiring quants and are looking for a complete educational package with a lot of explanation. Therefore, we have partnered with the QuantInsti and created a new tutorial course from beginners to an intermediate audience.