New research papers related to existing strategies:
#26 – Value (Book-to-Market) Anomaly
Liang: Performance of Value Investing Strategies in Japan’s Stock Market
http://vpcenter.ust.hk/public/files/Performance%20of%20Value%20Investing%20Strategies%20JP_2013-07-05.pdf
Abstract:
This white paper examines the performance of several value investing strategies based on various quantitative value measures of stocks in the Japanese stock market. These strategies significantly outperformed the aggregate stock market in the period from January 1975 to December 2011. In addition, they generated promising profits in the long-term bear market in the 1990–2011 period when the stock market dropped 62.21%.
#112 – Acceleration Effect Combined with Momentum in Stocks
Chen, Yu: Investor Attention, Visual Price Pattern, and Momentum Investing
http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2292895
Abstract:
Since investor attention is limited, stocks that attract attention are more likely to be chosen, while stocks that do not attract attention are often ignored. Given that a visual mode of analysis is more conductive to human cognition than algebraic numbers, we propose that the visual pattern of past prices is a salient signal that attracts investor attention, and thereby boosts returns. The stocks in the winner and loser groups are further classified based on their visual patterns of past prices. We construct a long-short portfolio including the stocks which are more likely to grab investor attention by their discernible visual patterns of past prices. Our long-short portfolio commands a compounded annual risk-adjusted return of 23.1%, almost double the conventional momentum profit. The outperformance holds under various alternative specifications. Moreover, the sheer size of these profits poses a further, significant challenge to the asset pricing literature and the market efficiency hypothesis.
#136 – Residual Momentum
Huhn, Scholz: Alpha Momentum and Price Momentum
http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2287848
Abstract:
We implement a momentum strategy that ranks stocks based on their daily three-factor alpha. This strategy outperforms a conventional price momentum strategy in the U.S. and in Europe in terms of three-factor alphas and Sharpe ratios. The difference in the composition between these two strategies can be explained by differences in their factor-related return contributions during the ranking period. In addition, the alpha momentum strategy exhibits smaller dynamic factor exposures within the investment period. In further analysis we find that i) a hedge strategy based on factor exposures determined during the formation period only works for alpha momentum, ii) price momentum can be subsumed by alpha momentum but not vice versa, and iii) the three-factor alpha of momentum strategies based on “alpha only” stocks doesn’t reverse in the sixty months following the formation period.
#224 – Profitability Factor Combined with Value Factor
Fama, French: A Four-Factor Model for the Size, Value, and Profitability Patterns in Stock Returns
http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2287202
Abstract:
A four-factor model directed at capturing the size, value, and profitability patterns in average stock returns is rejected on the GRS test, but for applied purposes it seems to provide an acceptable description of average returns. The profitability patterns in average returns are less of a challenge for the model than the value patterns. The success of the factors does not seem to be sensitive to the way they are defined, at least for the definitions considered here.
