Sector/industry picking or country picking can be a profitable trading style but is usually much more challenging than it seems at first sight. Building a good trading model requires a lot of research and dedication. Unfortunately, due to the limited numbers of industries and countries, sorting them on aggregate characteristics can wash out important cross-sectional variations in the characteristics and lead to concentrated portfolios prone to noisier realized returns.

In their fresh Dimensional Fund Advisors research piece, Dong, Huang, and Medhat (2023) touch on the question of whether investors should systematically emphasize certain industries or countries to increase expected returns. Their overhead view provides new insights and sums that investors will likely be better off pursuing premiums in the larger cross-section of individual securities and maintaining broad diversification across the smaller cross-sections of industries and countries.

If you’re a regular reader of our blogs (and we hope you are!), you would not miss that we like to touch macro-economic subjects. One of that never-fading topics is the role of gold as a crisis hedge. The probably most known commodity is a popular choice for a portion of the total portfolio, from small investors to central banks, for various reasons (be it diversification or hedging). So let’s not further delay it, and today we ask: Is gold really a safe haven?

The summer is slowly approaching; therefore, our new article will be on a little lighter tone. We will examine a research paper on a periodic event with sentiment implications. The authors (Abudy, Mugerman, Shust) focused on a specific song competition – the Eurovision Song Contest, an international song competition organized annually. They examined a positive swing in investor mood in the winning country the day after the Eurovision Song Contest and documented an average abnormal return of 0.381%. On the contrary, they did not find any negative sentiment in other participating countries.