New strategies:
#114 – Dividend Month Anomaly
Period of rebalancing: Monthly
Markets traded: equities
Instruments used for trading: stocks
Complexity: Complex strategy
Bactest period: 1927-2009
Indicative performance: 17,90%
Estimated volatility: 20,00%
Source paper:
Hartzmark, Solomon: The Dividend Month Premium
http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1930620
Abstract:
We document that companies have positive abnormal returns in months when they are expected to pay dividends. Abnormal returns in predicted dividend months are high both relative to all other companies (by 53 basis points per month), and relative to dividend-paying companies in months without a predicted dividend (by 37 basis points per month). These results are consistent with time-series effects of dividend clienteles – investors who desire dividends bid up the price before the ex-dividend day. Consistent with this, daily returns increase as the ex-dividend day approaches, and are negative afterwards. Returns are also larger in periods of economic uncertainty, when demand for dividends may be higher.
#115 – Short-Term Residual Reversal
Period of rebalancing: Monthly
Markets traded: equities
Instruments used for trading: stocks
Complexity: Complex strategy
Bactest period: 1929-2008
Indicative performance: 17,32%
Estimated volatility: 12,57%
Source paper:
Blitz, Huij, Lansdorp, Verbeek: Short-Term Residual Reversal
http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1911449
Abstract:
Conventional short-term reversal strategies exhibit dynamic exposures to the Fama and French (1993) factors. We develop a novel reversal strategy based on residual stock returns that does not exhibit these exposures and consequently earns risk-adjusted returns that are twice as large as those of a conventional reversal strategy. Residual reversal strategies generate statistically and economically significant profits net of trading costs, even when we restrict our sample to large-cap stocks over the post-1990 period. Our results are inconsistent with the notion that reversal effects are attributable to trading frictions, liquidity, or non-synchronous trading of stocks and pose a serious challenge to rational asset pricing models.
New research papers related to existing strategies:
#16 – Mean Reversion Effect in Country Equity Indexes
New related paper:
Balvers, Wu, Gilliland: Stock Markets and Parametric Contrarian Investment Strategies
http://andromeda.rutgers.edu/~yangruwu/mr_jf.pdf
Abstract:
For U.S. stock prices, evidence of mean reversion over long horizons is mixed, possibly due to lack of a reliable long time series. Using additional cross-sectional power gained from national stock index data of 18 countries during the period 1969 to 1996, we find strong evidence of mean reversion in relative stock index prices. Our findings imply a significantly positive speed of reversion with a halflife of three to three and one-half years. This result is robust to alternative specifications and data. Parametric contrarian investment strategies that fully exploit mean reversion across national indexes outperform buy-and-hold and standard contrarian strategies.
#18 – January Barometer
New related paper:
Marshall, Visaltanachoti: The Other January Effect: Evidence Against Market Efficiency?
http://www.fullermoney.com/content/2010-03-02/Januaryeffrct.pdf
Abstract:
The Other January Effect (OJE), which suggests positive (negative) equity market returns in January predict positive (negative) returns in the following 11 months of the year, underperforms a simple buy-and-hold strategy before and after risk-adjustment. Even the best modified OJE strategy, which benefits from several ex-post adjustments, does not generate statistically or economically significant excess returns. When the OJE is tested with a method that is consistent with investor experience it is clear the OJE is no more profitable than an 11- month strategy that uses November or December as the conditioning month.
#38 – Accrual Anomaly
New related paper:
Dechow, Khimich, Sloan: The Accrual Anomaly
http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1793364
Abstract:
This paper provides a practitioner-oriented review of the accrual anomaly in Sloan (1996) and related subsequent research. We begin with two simple examples that illustrate the computation and interpretation of accruals. We next review Sloan's (1996) original paper and related subsequent research corroborating Sloan's interpretation of the accrual anomaly. We next summarize research providing alternative explanations for the accrual anomaly. We finish with a brief discussion of the practical implications of this research.
