New strategies:
#201 – Instititutional Ownership Effect During Earnings Announcements
Period of rebalancing: Daily
Markets traded: equities
Instruments used for trading: stocks
Complexity: Complex strategy
Bactest period: 2000 – 2004
Indicative performance: 87%
Estimated volatility: not stated
Source paper:
Berkman, Koch: Overpricing: Evidence from Earnings Announcements
http://papers.ssrn.com/sol3/papers.cfm?abstract_id=921508
Abstract:
In the days before earnings announcements we find an average price increase of almost 1 percent for stocks that are likely to be overpriced already – stocks with low institutional ownership combined with high market-to-book ratios, turnover, volatility, or analyst forecast dispersion. However, in the days after earnings announcements these same stocks generate negative abnormal returns of more than 3 percent. Together, these results indicate a significant net correction following earnings announcements for stocks that are prone to be overpriced. These results are consistent with the optimism bias hypothesized in Miller (1977), and with recent evidence that cross-sectional return predictability is concentrated among stocks with low institutional ownership.
New research papers related to existing strategies:
#14 – Momentum Effect in Stocks
Landis, Skouras: Momentum is Higher Than We Think
http://www.aueb.gr/conferences/Crete2012/papers/papers%20senior/Skouras.pdf
Abstract:
This paper evaluates Momentum on international markets based on data from Thompson Datastream (TDS). Using a complete Â…ltered and corrected daily database from 52 International markets, and more than 50.000 common stocks, from TDS, we re-examine previous empirical work on International Momentum and document consistently higher momentum returns for the majority of markets and regions of our sample. We find evidence that data outliers create a "Pseudo-Reversal effect" in international Winner minus Loser profits, reflecting in the overestimation of premiums of loser portfolios and the underestimation of the proÂ…ts of the momentum strategies. Moreover, we revise International Momentum premiums from 1964 to 2010, for all markets and regions of our sample and document that momentum continues to be strong in the majority of individual markets and all in regions except Japan.
#22 – Momentum Effect in Stocks
Durr, Voegeli: Structural Properties of Commodity Futures Term Structures and Their Implications for Basic Trading Strategies
http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1605211
Abstract:
This paper examines the informational content of commodity futures term structures over time. Time series of commodity prices and returns are analyzed by means of static and rolling principal component analysis. We use weekly data from January 1998 to July 2009 of 23 commodity underlyings from Energy, Metals, Agriculture and Livestock. We find high stability of the principal components and their explanatory power over time. The first component identified as a level factor is paramount for the interpretation of term structure dynamics for most underlyings. This result suggests that an investor can exploit the information contained within the term structure and revealed by principal component analysis. We formulate three distinctive investment strategies based on term structure information which optimize roll yields. By creating portfolios according to a principal component ranking we significantly outperform a long-only benchmark.
#69 – Post-Earnings Announcement Drift Combined with Strong Momentum
Kido: Short-Term Momentum: The Centered Momentum Effect
http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1359888
Abstract:
Finance researchers have established a strict timeline in the relationship between previous returns and future returns. Over a short-term period-generally defined as shorter than three months-there exists a reversal effect by which stocks that exhibited positive (negative) returns in the past will experience negative (positive) returns in the near future. Over an intermediate-term period-generally defined as between three and twelve months-there exists a momentum effect whereby stocks that exhibited positive (negative) returns in the past will experience positive (negative) returns in the future. This paper provides two contributions to the literature on the momentum effect. First, I demonstrate that centering the measurement dates of prior returns around company-specific earnings announcement dates causes a short-term momentum effect rather than a reversal. Second, I show that the short-term momentum effect created by the centering process retains its explanatory power even in the face of post-earnings announcement drift.
