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#33 – Post-Earnings Announcement Effect

Authors: Kwon, Kim

Title: Investment Horizon of Shareholders and Post-Earnings-Announcement Drift

Link: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2545189

Abstract:

We hypothesize that post-earnings-announcement drift (PEAD) is caused by underreaction of long-term investors since they do not pay much attention to short-term events. Consistent with the hypothesis, empirical observations show that stocks mostly held by long-term investors exhibit strong PEAD, while stocks mostly held by short-term investors does not. The results are still robust even after transaction costs, investor recognition, temporal inattention, and reversal in earnings surprises are controlled for.

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Related research paper has been included into existing free strategy reviews.

#5 – FX Carry Trade
#8 – FX Momentum
#9 – FX Value – PPP Strategy

Authors: Pojarliev, Levich

Title: A New Look at Currency Investing

Link: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2571391

Abstract:

The authors of this book examine the rationale for investing in currency. They highlight several features of currency returns that make currency an attractive asset class for institutional investors. Using style factors to model currency returns provides a natural way to decompose returns into alpha and beta components. They find that several established currency trading strategies (variants of carry, trend-following, and value strategies) produce consistent returns that can be proxied as style or risk factors and have the nature of beta returns. Then, using two datasets of returns of actual currency hedge funds, they find that some currency managers produce true alpha. Finally, they find that adding to an institutional investor’s portfolio even a small amount of currency exposure — particularly to alpha generators — can make a meaningful positive impact on the portfolio’s performance.

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#83 – Pre-Holiday Effect

Authors: Carchano, Tornero

Title: The Pan-European Holiday Effect

Link: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2556949

Abstract:

The construction of a single European block in the context of financial markets has caused the different national stock exchanges of the euro area to converge towards one common trading calendar that allows to study whether the holiday effect is a pan-European calendar anomaly or country-specific. By applying simulation methods, we provide evidence of the existence of statistically and economically abnormal positive pre- and post-holiday returns in the Eurozone which are not related to higher than average levels of volatility, but which can be explained by the preference of investors to avoid selling around European holidays

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Related research paper has been included into existing free strategy review.

#118 – Time Series Momentum Effect

Authors: Hutchinson, O'Brien

Title: Trend Following and Macroeconomic Risk

Link: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2550718

Abstract:

We examine the relationship between the returns of trend following and macroeconomic risk. Our results demonstrate that macroeconomic factors do have a statistically significant relationship with trend following, when we allow for the dynamic exposures of the strategy. We find that this time varying risk exposure allows trend following to generate positive returns across a wide range of bond and equity market cycles. Prior research has documented that the majority of cross sectional momentum returns are derived from macroeconomic risk exposures. However, the same is not true for trend following where at least half of performance comes from the unexplained components of futures returns. When we relate performance to the conditional volatility of macroeconomic variables, our results show that trend following generates higher returns in periods where economic uncertainty is low.

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Related research paper has been included into existing free strategy review.

#26 – Value (Book-to-Market) Anomaly

Authors: Hsu, Myers, Whitby:

Title: Timing Poorly: A Guide to Generating Poor Returns While Investing in Successful Strategies

Link: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2560434

Abstract:

Value investing is viewed as a historically successful investment strategy. The literature generally agrees on the robustness of the strategy but disagrees on the explanations for the success. While the empirical research focuses exclusively on the time-series returns — or the buy-and-hold return — of a value portfolio, the investor experience is, of course, driven by the internal rate of return (IRR) — or the dollar-weighted average return. Although the buy-and-hold average portfolio return may be the proper way to document the anomaly, the dollar-weighted average return can shed light on some interesting questions which cannot be addressed by analyzing the buy-and-hold returns. In particular, examining the dollar-weighted returns allows us to ask whether investors have actually generated superior IRR consistent with the reported buy-and-hold outperformance of value strategies.

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