Three new strategies have been added:

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

We are continuing in our short series of articles about calendar / seasonal trading. The main focus of this paper is to show that the well-working calendar / seasonal anomalies can be refined. The aim is to find the right factors and find a way how to combine them in a search for profit from the practitioner’s point of view. Based on our previous research, calendar anomalies are profitable, but there is a possible way how to enhance their performance. This can be done by employing momentum strategies. By assigning a weight to assets from a diversified set according to their momentum value, it is possible to find a profitable asset during various global market conditions. Moreover, a trend factor is used to ensure that when market conditions are not favorable, the strategy will not trade. Such addition is a typical approach used for reducing maximal draw-downs. Finally, since this paper is written from the practitioner’s point of view, we are assuming some model transaction costs and examine the strategy in their presence.

Do you want to have an outperforming hedge fund? Then write a description of your investment strategy more creatively, clearly and use more synonyms… Of course, I am just kidding. However, a recent academic study written by Joenväärä, Karppinen, Teo, and Tiu shows that text sophistication can be used to find skilled hedge fund managers. Lexical diversity is the propensity of the writer to use multiple synonyms rather than repeated words. Skilled and, therefore, cognitively gifted managers are more likely to use rich vocabulary when writing their strategy descriptions. Therefore, if you feel that your favorite manager composes clear and captivating texts, maybe he is skilled also in his primary role – investment management …

Authors: Joenväärä, Karppinen, Teo, Tiu

Title: Text Sophistication and Sophisticated Investors

We at Quantpedia absolutely love long-term studies, and academic research paper written by Bhardwaj, Janardanan, and Rouwenhorst is really exceptional. There are a lot of studies covering a long history of equity and bond markets. But futures markets are not covered so well, and that’s the reason why is this paper so valuable. An additional plus is that study covers also delisted contracts, which makes the study’s data quality even better. Quantpedia’s recommended read to anyone interested in asset allocation into commodities …

Authors: Bhardwaj, Janardanan and Rouwenhorst

Title: The Commodity Futures Risk Premium: 1871–2018

Four new strategies have been added:

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

Financial academics have described so many equity factors that the whole universe of them is sometimes called “factor zoo”. Therefore, it is no surprise that there is a quest within an academic community to bring some order into this chaos. An interesting research paper written by Favilukis and Zhang suggests explaining a lot of equity factors with momentum anomaly. They show that very often, up to 50% of the equity factor returns can be linked to returns of momentum strategy. This link is especially prevalent in short legs of equity factors.

Authors: Favilukis, Zhang

Title: One Anomaly to Explain Them All