New strategies:
#195 – Long Term Debt Factor within Stocks
Period of rebalancing: Yearly
Markets traded: equities
Instruments used for trading: stocks
Complexity: Complex strategy
Bactest period: 1962 – 2001
Indicative performance: 10.50%
Estimated volatility: 6.58%
Source paper:
Richardson, Sloan, Soliman, Tuna: Accrual Reliability, Earnings Persistence and Stock Prices
http://papers.ssrn.com/sol3/papers.cfm?abstract_id=521062
Abstract:
This paper extends the work of Sloan (1996) by linking accrual reliability to earnings persistence. We construct a model showing that less reliable accruals lead to lower earnings persistence. We then develop a comprehensive balance sheet categorization of accruals and rate each category according to the reliability of the underlying accruals. Empirical tests generally confirm that less reliable categories of accruals lead to lower earnings persistence and that investors do not fully anticipate the lower earnings persistence, leading to significant security mispricing. We conclude that there are significant costs associated with the recognition of unreliable information in financial statements.
#196 – Effect of Change in Non-Current Operating Assets
Period of rebalancing: Yearly
Markets traded: equities
Instruments used for trading: stocks
Complexity: Complex strategy
Bactest period: 1962 – 2001
Indicative performance: 16.10%
Estimated volatility: 7.26%
Source paper:Richardson, Sloan, Soliman, Tuna: Accrual Reliability, Earnings Persistence and Stock Prices
http://papers.ssrn.com/sol3/papers.cfm?abstract_id=521062
Abstract:
This paper extends the work of Sloan (1996) by linking accrual reliability to earnings persistence. We construct a model showing that less reliable accruals lead to lower earnings persistence. We then develop a comprehensive balance sheet categorization of accruals and rate each category according to the reliability of the underlying accruals. Empirical tests generally confirm that less reliable categories of accruals lead to lower earnings persistence and that investors do not fully anticipate the lower earnings persistence, leading to significant security mispricing. We conclude that there are significant costs associated with the recognition of unreliable information in financial statements.
New research papers related to existing strategies:
#14 – Momentum Effect in Stocks
Rachwalski, Wen: Momentum, Risk and Underreaction
http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2085340
Abstract:
Momentum profits can be explained by exposure to risks omitted from common factor models and underreaction to innovations in these omitted risks. Consistent with risk as a partial explanation of momentum profits, long formation period momentum strategies earn higher returns and are more highly correlated with factors designed to measure risk than short formation period momentum strategies.
#133 – Timing the Small Cap Effect
Zakamouline: Predictable Dynamics in the Small Stock Premium
http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2080404
Abstract:
We start this paper by providing a detailed study of how the mean monthly return on the Small-Minus-Big (SMB) Fama-French factor is affected by the January effect and the stock market return during the preceding month and preceding calendar year. We then proceed to building a predictive model for the monthly SMB factor return that incorporates the January effect and the dependence on both the market return during the preceding month and preceding calendar year. We demonstrate that the January effect constitutes a much lesser part of the size effect than it was previously supposed. Our findings suggest that the small stock premium appears mainly as the result of a delayed and strong reaction of small stocks to good news during a period of prolonged bad times of economy.
