{"id":648,"date":"2016-01-12T14:08:01","date_gmt":"2016-01-12T14:08:01","guid":{"rendered":"http:\/\/quantpedia.com\/?p=648"},"modified":"2019-08-22T05:47:58","modified_gmt":"2019-08-22T05:47:58","slug":"quantpedia-update-12th-january-2016","status":"publish","type":"post","link":"https:\/\/vvv.quantpedia.com\/es\/quantpedia-update-12th-january-2016\/","title":{"rendered":"Quantpedia Update – 12th January 2016"},"content":{"rendered":"

\n\tNew strategies:<\/u><\/strong><\/p>\n

\n\t#291 – Options Convexity Predicts Consecutive Stock Returns<\/strong><\/p>\n

\n\tPeriod of rebalancing:<\/strong> monthly
\n\tMarkets traded: <\/strong>equities
\n\tInstruments used for trading:<\/strong> stocks
\n\tComplexity:<\/strong> Complex strategy
\n\tBactest period:<\/strong> 2000-2013
\n\tIndicative performance:<\/strong> 14.44%
\n\tEstimated volatility:<\/strong> 9.99%
\n\tSource paper:<\/strong><\/p>\n

\n\tPark, Kim, Shim: A Smiling Bear in the Equity Options Market and the Cross-section of Stock Returns<\/strong>
\n\thttp:\/\/papers.ssrn.com\/sol3\/papers.cfm?abstract_id=2632763<\/a>
\n\tAbstracto:
\n\tWe propose a measure for the convexity of an option-implied volatility curve, IV convexity, as a forward-looking measure of excess tail-risk contribution to the perceived variance of underlying equity returns. Using equity options data for individual U.S.-listed stocks during 2000-2013, we find that the average return differential between the lowest and highest IV convexity quintile portfolios exceeds 1% per month, which is both economically and statistically significant on a risk-adjusted basis. Our empirical findings indicate that informed options traders anticipating heavier tail risk proactively induce leptokurtic implied distributions of underlying stock returns before equity investors express their tail-risk aversion.<\/p>\n

\n\t#292 – Momentum Seasonality and Investor Preferences<\/strong><\/p>\n

\n\tPeriod of rebalancing:<\/strong> quarterly
\n\tMarkets traded: <\/strong>equities
\n\tInstruments used for trading:<\/strong> stocks
\n\tComplexity:<\/strong> Simple strategy
\n\tBactest period:<\/strong> 1983-2012
\n\tIndicative performance:<\/strong> 8.00%
\n\tEstimated volatility:<\/strong> not stated
\n\tSource paper:<\/strong><\/p>\n

\n\tBarradale: Covering-up when tide goes out? Momentum sesionality and investor preferences<\/strong>
\n\thttp:\/\/papers.ssrn.com\/sol3\/papers.cfm?abstract_id=2603199<\/a>
\n\tAbstracto:
\n\tWe use the seasonal patterns in momentum returns to provide insight into investor preferences. We find the momentum factor return is much greater prior to the calendar quarter-end, especially after a stock market decline. This pattern holds more strongly for larger stocks, for both winners and losers, for the US and internationally, and especially in recent years. The established year-end seasonality is consistent with the quarterly pattern, rather than tax-loss selling. The time-series momentum of markets follows the same pattern, primarily after a market decline. The patterns imply investors prefer well-performing stocks\/markets at the quarter-end, particularly in a declining market.<\/p>\n

\n\tNew research paper related to existing strategies:<\/strong><\/u><\/p>\n

\n\t#117 – Lottery Effect in Stocks
\n\t#223 – Realized Skewness Predicts Equity Returns
\n\t#266 – Skewness Effect in Country Equity Indexes
\n\t#268 – Expected Skewness and Momentum in Stocks<\/strong><\/p>\n

\n\tZhang: Downside Gambling and Asset Prices<\/strong>
\n\thttp:\/\/papers.ssrn.com\/sol3\/papers.cfm?abstract_id=2648144<\/a>
\n\tAbstracto:
\n\tThis paper documents a novel empirical finding: skewness preference has a greater impact on asset prices during market downturns than during market booms. This finding is named as "downside gambling effect". Exploiting the significant negative relationship between downside skewness and future asset returns alone will generate an annual excess return of 7.74% that is not explained by Fama-French factors. This empirical result is robust to various controls, such as for different portfolio holding periods, for value-weighted portfolios, or for volatility and kurtosis effects. A model is proposed to explain this fact by showing that in bad times, fewer people gamble and the remaining gambling investors invest more heavily in lottery-type stocks. The model also implies that in bad times, risk aversion is higher and more people fear disaster.<\/p>\n

\n\tTwo additional related research paper have been included into existing free strategy reviews during last 2 week:<\/strong><\/u><\/p>\n

\n\t#13 – Short Term Reversal in Stocks
\n\t#14 – Momentum Effect in Stocks
\n\t#15 – Momentum Effect in Country Equity Indexes<\/strong><\/p>\n

\tDobrynskaya: Upside and Downside Risks in Momentum Returns<\/strong>
\n\thttp:\/\/papers.ssrn.com\/sol3\/papers.cfm?abstract_id=2695001<\/a>
\n\tAbstracto:
\n\tI provide a novel risk-based explanation for the profitability of momentum strategies. I show that the past winners and the past losers are differently exposed to the upside and downside market risks. Winners systematically have higher relative downside market betas and lower relative upside market betas than losers. As a result, the winner-minus-loser momentum portfolios are exposed to extra downside market risk, but hedge against the upside market risk. Such asymmetry in the upside and downside risks is a mechanical consequence of rebalancing momentum portfolios. But it is unattractive for an investor because both positive relative downside betas and negative relative upside betas carry positive risk premiums according to the Downside-Risk CAPM. Hence, the high returns to momentum strategies are a mere compensation for their upside and downside risks. The Downside Risk-CAPM is a robust unifying explanation of returns to momentum portfolios, constructed for different geographical and asset markets, and it outperforms alternative multi-factor models.<\/p>\n

\n\t#25 – Small Capitalization Stocks Premium Anomaly
\n\t#26 – Value (Book-to-Market) Anomaly<\/strong><\/p>\n

\tLambert, Hubner: Size Matters, Book Value Does Not! The Fama-French Empirical CAPM Revisited<\/strong>
\n\thttp:\/\/papers.ssrn.com\/sol3\/papers.cfm?abstract_id=2506690<\/a>
\n\tAbstracto:
\n\tThe Fama and French (F&F) factors do not reliably estimate the size and book-to-market effects. Our paper shows that the former has been underestimated in the US market while the latter overestimated. We do so by replacing F&F's independent rankings by the conditional ones introduced by Lambert and Hubner (2013), over which we improve the sorting procedure. This new specification better reflects the properties of the individual risk premiums. We emphasize a much stronger size effect than conventionally documented. As a major related outcome, the alternative risk factors deliver less specification errors when used to price passive investment indices..<\/p>","protected":false},"excerpt":{"rendered":"

\n\tTwo new strategies have been added:<\/p>\n

\n\t#291 – Options Convexity Predicts Consecutive Stock Returns
\n\t#292 – Momentum Seasonality and Investor Preferences<\/strong><\/p>\n

\n\tOne new related research paper has been included into existing strategy reviews. And two additional related research paper have been included into existing free strategy reviews during last 2 weeks.<\/p>","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[],"tags":[],"class_list":["post-648","post","type-post","status-publish","format-standard","hentry"],"_links":{"self":[{"href":"https:\/\/vvv.quantpedia.com\/es\/wp-json\/wp\/v2\/posts\/648","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/vvv.quantpedia.com\/es\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/vvv.quantpedia.com\/es\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/vvv.quantpedia.com\/es\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/vvv.quantpedia.com\/es\/wp-json\/wp\/v2\/comments?post=648"}],"version-history":[{"count":0,"href":"https:\/\/vvv.quantpedia.com\/es\/wp-json\/wp\/v2\/posts\/648\/revisions"}],"wp:attachment":[{"href":"https:\/\/vvv.quantpedia.com\/es\/wp-json\/wp\/v2\/media?parent=648"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/vvv.quantpedia.com\/es\/wp-json\/wp\/v2\/categories?post=648"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/vvv.quantpedia.com\/es\/wp-json\/wp\/v2\/tags?post=648"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}