#5 – FX Carry Trade
#8 – FX Momentum
Bae, Elkamhi: Global Equity Correlation in Carry and Momentum Trades
http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2521608
Abstract:
We provide a risk-based explanation for the excess returns of two widely-known currency speculation strategies: carry and momentum trades. We construct a global equity correlation factor and show that it explains the variation in average excess returns of both these strategies. The global correlation factor has a robust negative price of beta risk in the FX market. We also present a multi-currency model which illustrates why heterogeneous exposures to our correlation factor explain the excess returns of both portfolios.
#7 – Volatility Effect in Stocks – Long-Only Version
de Carvalho, Zakaria, Xiao, Moulin: Low Risk Anomaly Everywhere – Evidence from Equity Sectors
http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2527852
Abstract:
We give strong empirical evidence of a risk anomaly in equity sectors in a number of regions and countries of developed and emerging markets, with the lowest risk stocks in each activity sector generating higher returns than would be expected given their levels of risk, and the converse outcome for the riskier stocks. We believe this evidence is a likely consequence of the fact that equity analyst and active fund managers tend to specialize in particular sectors and to mainly select stocks from those sectors. Additionally, constraints restricting the deviation of sector weights in active portfolios against their market capitalization benchmarks are often used by active fund managers, in particular by quantitative managers which tend to go as far as being sector neutral. As a consequence, we find that sector-neutral, low-risk approaches appear more efficient at generating alpha than non-sector neutral approaches, with the latter showing strong sector allocation towards financials, utilities and consumer staples than sector neutral, at least when applied to developed countries in a global universe. We also discuss some properties of low-risk investing such as tail risk, turnover and liquidity.
#8 – FX Momentum
Filippou, Gozluklu, Taylor: Global Political Risk and Currency Momentum
http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2517400
Abstract:
This paper investigates the role of political risk in the currency market. We propose a measure of global political risk relative to U.S. that captures unexpected political conditions. Global political risk is priced in the cross-section of currency momentum and it contains information beyond other risk factors. Our results are robust after controlling for transaction costs, reversals and alternative limits to arbitrage. The global political environment affects all currencies; investors following momentum strategies are compensated for the exposure to the global political risk of those currencies they hold, i.e., the past winners, while past losers provide a natural hedge.
#65 – Enhanced Value Premium
Kim, Lee: Implementability of Trading Strategies Based on Accounting Information: Piotroski (2000) Revisited
http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2428946
Abstract:
The return accumulation approach used in studies on accounting-related anomalies cannot be replicated in a practical context because the number and identity of individual observations within a portfolio are assigned within a research context before the accounting information of all firms in the portfolio would actually be available in real time. We explore this issue by re-examining the results in Piotroski (2000) [Value investing: the use of historical financial statement information to separate winners from losers, Journal of Accounting Research, 38 (supplement), 1-44]. We find that the relationship between Piotroski’s fundamental signals and subsequent returns is partly driven by the choice of return accumulation periods. Because the method used in Piotroski is typical of those often employed in the accounting literature, this study suggests that evidence of profitable trading strategies and market inefficiency in the literature is likely to be overstated.
#207 – Value Effect within Countries
#247 – Value Effect within Countries v2
Zaremba: Country Selection Strategies Based on Value, Size and Momentum
http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2521026
Abstract:
This study provides convincing evidence that stock markets with low capitalisation, low valuation ratios and good past performance ten to outperform country markets with high capitalisation, high valuation ratios and low momentum. Based on sorting procedures and cross-sectional tests conducted across 78 countries over the period 1999 to 2014, it has been found out that value, size and momentum effects at the country level are stronger across small and medium country markets than large ones. Thus, bearing in mind the declining benefits of international diversification observed in recent decades, it is recommended that investors include country-level factor premiums in their strategic asset allocation, without postponing them to further stages of an investment process. In addition, it has been shown that intermarket value, size and momentum effects may be used in multifactor asset pricing models, which perfectly explains the variation in stock returns at the country level.
