Academic Research

Hedge vs. Mutual Funds and the ‘Timing of Information Acquisition’

Oct 28th, 2014 | Filed under: Academic Research, Behavioral finance, CAPM / Alpha Theory, Today's Post

A new paper by a scholar at the McCombs School of Business looks at what causes what on Wall Street, starting with how (if at all) analyst downgrades cause price declines.


Liquidity Makers and Takers: A Nobel Prize

Oct 19th, 2014 | Filed under: Academic Research, Retail Investing, Today's Post

The latest Economics Award has drawn the attention of the world briefly to a body of work that has a number of points of interest for the alt-investment community.


Burr XII, Extreme Value, and a Fantasy

Sep 15th, 2014 | Filed under: Academic Research, Asset allocation, Risk management, Today's Post

The eight authors of a new study seek to add to “the existing literature of Bayesian VaR methods by … considering the … general class of Burr XII extreme value distributions “ and by estimating error bounds. After having a little fun we try to puzzle out what that means.


Winner Takes All, and Liquidity Takers Win

Jul 22nd, 2014 | Filed under: Academic Research, Algorithmic and high-frequency trading, CAPM / Alpha Theory, Derivatives, Today's Post

It does appear that speed is helpful in generating alpha. How is it helpful? Here there are two views, and the less HFT-friendly of these views has received some scholarly/empirical support.


Traders Sometimes Want Macro-News to Be Free

Jul 9th, 2014 | Filed under: Academic Research, ETFs, Indexes, Today's Post

There exists “robust evidence of informed trading during lockup periods ahead of the Federal Open Market Committee … monetary policy announcements” say three authors. Some agencies can embargo news effectively. The FOMC doesn't seem to be among them.


Private Lawsuits Over Order Types Used to Facilitate HFT

Jun 2nd, 2014 | Filed under: Academic Research, Algorithmic and high-frequency trading, Legislation/Court rulings, Today's Post

HFTs and trading venues alike have worked hard to fit their practices into the Reg NMS framework. As a consequence, violations of NMS “are unlikely” Dolgopolov writes, “to provide a basis for civil liability of HFTs who use such orders because of their compliance – however formalistic – with this regulatory norm.”


Index Provider Transparency: End Users Unimpressed

May 19th, 2014 | Filed under: Academic Research, Best Practices, Indexes, Today's Post

Europe's index providers, by their own account, already have strong incentives to offer optimal transparency and, in their self-interest, they do so. A survey and report from EDHEC examines this claim.


Payments, Technology, and a Curve with a Kink in It

May 11th, 2014 | Filed under: Academic Research, Alpha Hunters, Alpha Seekers, Currencies, Today's Post

On Barhydt's view, we have to see Bitcoin and other currencies like it as part of an evolution of the whole world of commerce, payments, and exchange, a vast movement of disintermediation that threatens to disrupt the banking and finance industries.


Pragmatic Foundations for an Austrian Home

Apr 20th, 2014 | Filed under: Academic Research, Today's Post

Christopher Faille makes it clear that he has no Keynesian sympathies. In his humble opinion, the Austrians are in general right on the economics, though they could use some empirical/pragmatic assistance on the matter of epistemology.


Science, Scientism and Economics: Some Timely Thoughts

Apr 9th, 2014 | Filed under: Academic Research, Today's Post

If you wish, you can take the idea that humans are purposive as a very broad empirical generalization. Or you can take it in various other ways. What matters is that it certainly isn’t as specific or historical as the kind of fact-gathering that the historicists of yore had in mind. And that continues to serve as a sore point in discussions within and about Austrian economics.


European ETFs: Innovations the Key to Growth

Mar 27th, 2014 | Filed under: Academic Research, Alpha Strategies, Alternative Beta & Hedge Fund Replication, ETFs, Infrastructure, Today's Post

The way to keep growing is to keep changing. For the European ETF market, that means product innovation, from infrastructure funds to smart beta.


Stock Crashes and the Damming of Bad News

Mar 6th, 2014 | Filed under: Academic Research, Risk management, Socially responsible investing, Today's Post

Hoarding bad news bears this meaning: at some point a lot of bad news is going to break through the informational dam all at once, producing a flood, that is, a firm-specific crash.


Liquidity? Perhaps It Is What it Does

Feb 23rd, 2014 | Filed under: Academic Research, Asset pricing, Forex, Today's Post

Four researchers have developed an "event-based" understanding of Liquidity, measuring it as a characterization (from 0 to 1) of the predictability of asset price trajectories. Illiquidity is surprise.


Hedge Fund Replication: A Practitioner’s Scorecard

Jan 30th, 2014 | Filed under: Academic Research, Alpha Hunters, Alpha Seekers, Alpha Strategies, Alternative Beta & Hedge Fund Replication, Hedge Fund Operations and Risk Management, Hedge Fund Strategies, Today's Post

Andrew Beer looks at hedge fund replication to see if it works.


Really Fast Information Processors or Tippees?

Jan 27th, 2014 | Filed under: Academic Research, Algorithmic and high-frequency trading, Alpha Strategies, Regulatory, Today's Post

A forthcoming paper by Goldstein et al opens a window onto the convergence of two market-structure issues that, until quite recently, had not even been thought very similar.


Normal Backwardation Foiled Going Forward

Sep 16th, 2013 | Filed under: Academic Research, Commodities, Derivatives

A forthcoming paper suggests that the old risk premium in crude oil futures has essentially disappeared, at least as averaged out over (rather modest) spans of time, and proposes commodity index funds as an explanation of the disappearance.


A Model for PE Managers and Their Scholars

Aug 28th, 2013 | Filed under: Academic Research, Behavioral finance, Private Equity, Today's Post

Two scholars have published a new model of private equity funds, looking for the real drivers of abnormal returns by process of elimination.


Stop Loss (and Gain) Rules as Alpha Generators

Jul 15th, 2013 | Filed under: Academic Research, CAPM / Alpha Theory, Today's Post

A strategy based largely on stop-loss and stop-gain rules, one that uses such rules as the sole means of shifting assets from one asset class to another, can earn statistically significant CAPM alpha, according to a provocative study from the University of Arizona.


More on the Post-Keynesian Smackdown: Subway Tokens Edition

Jun 19th, 2013 | Filed under: Academic Research, Currencies, Today's Post

Mosler is perfectly willing to have governments create money for their own spending. He does not see that as necessarily inflationary, apparently because the same governments can always tamp down on inflation through the tax system.


Post-Keynesian Smackdown at Columbia

Jun 11th, 2013 | Filed under: Academic Research, Currencies, Today's Post

The dispute framed by a June 3d debate at Columbia Law School will define the future (and no very-distant future either) of economic policy in the western world and of the fate of all the currencies involved. The question will be: after Keynes, what? We owe thanks to everybody involved in arranging for the Murphy/Mosler debate.


Lending Securities: Which Mutual Funds Do It Best

Mar 6th, 2013 | Filed under: Academic Research, Retail Investing, Timely Research, Today's Post

A newly released paper concludes that the returns many mutual funds make from lending their portfolio securities increase as the directors on their boards become more independent. Separately, it is a good sign if the directors have, as the saying goes, 'skin in the game.'


If the CFO Says He Feels ‘Fantastic,’ Sell Short

May 24th, 2012 | Filed under: Academic Research, Today's Post

Investors want to know whether the executives are speaking deceptively well before the restatement is filed. In order to help with that goal, Larcker and Zakolyukina in the paper, “Detecting Deceptive Discussions in Conference Calls,” have analyzed the transcripts, focusing especially on CEOs and CFOs because they are “the most likely executives to have knowledge about financial statement manipulation.”


Quick Course: 140 Years of Panics and Policy

May 16th, 2012 | Filed under: Academic Research, Today's Post

Should a lender of last resort lower interest rates to near zero in the hope that liquidity will drown systemic sorrows? Bagehot argues for a contrary approach. The interest rates for loans made to desperate borrowers should be high. “This will operate as a heavy fine on unreasonable timidity, and will prevent the greatest number of applications by persons who do not require it. The rate should be raised early in the panic, so that the fine may be paid early…."


EDHEC Survey: Contracts, Not Regulation, Should Clarify Restitution

May 8th, 2012 | Filed under: Academic Research, Risk management, Today's Post

The issue of restitution for loss has been very much on the midns of the asset management industry over the last four years. As EDHEC observes in its new report on non-financial risks, “The collapse of Lehman not only [showed] the world that a systemically large institution could fail; it put … the question of international cooperation and rules harmonisation on centre stage. Restitution may be rendered impossible, at least under reasonable delays, in extreme cases such as the default of an institution – reputable as it might have been.”


EDHEC on CDS Speculators and Eurozone Bonds

Apr 9th, 2012 | Filed under: Academic Research, Timely Research, Today's Post

The relationship between two markets that O’Kane posits might almost be taken as a paradigm of the difference between Granger causation and physical causation. Consider the case of two distinct radar systems, one better at long range detection than the other. The superior radar system will detect an incoming airplane before the inferior system will. Thus, there will be a relationship of Granger causation between the detection of a particular blip on the better system and its detection on the other system. If we see an incoming blip on the better system we will be able to predict that it will soon show up on the inferior system. It doesn’t follow, though, that the one radar is physically causing anything to happen to the other radar.


Hedge Puppies are Still Top Dogs When it Comes to Performance

Oct 18th, 2011 | Filed under: Academic Research, Alpha Strategies, Hedge Fund Industry Trends, Performance, Analytics & Metrics, Today's Post

The latest version of a yearly analysis tells the same old story about performance, now backed up by fifteen years of data. And the potential rewards of investing with smaller funds go beyond what you see in the database statistics.


Looking at an Ink Blot, Seeing a Green Light

Sep 26th, 2011 | Filed under: Academic Research, Commodities, Timely Research, Today's Post

International Monetary Fund research shows that speculation does not influence the commodities markets.


Study finds that an increase in assets isn’t all that great after all. But it won’t kill you either.

Sep 7th, 2011 | Filed under: Academic Research, Hedge Fund Industry Trends, Today's Post

What happens when a hedge fund gets a windfall of new investment dollars?


Activist Hedge Funds: War for the Hearts & Minds of Accountants

Aug 25th, 2011 | Filed under: Academic Research, Hedge Fund Industry Trends, Hedge Fund Operations and Risk Management, Today's Post

Corporate CEOs aren't the only ones who dread the appearance of activist hedge fund managers on their radar screens. Activists are giving the accounting departments pause as well, according to a new paper by Hall and Trombley.


Institutional investors found to be a “destabilizing” influence – but only over short time periods

Jun 23rd, 2011 | Filed under: Academic Research, Commodities, Today's Post

A paper published by he European Central Bank this month argues that purely-financial investors do indeed "destabilize" oil prices by indiscriminately allocating capital to oil futures.


Blowing bubbles and capturing them in real time

Jun 8th, 2011 | Filed under: Academic Research, Timely Research, Today's Post

Some new research shows that it may be possible to mathematically determine a bubble before it forms, let alone pops.


Can networking actually be a bad thing for hedge funds?

May 2nd, 2011 | Filed under: Academic Research, Hedge Fund Operations and Risk Management, Today's Post

A recent study suggests to at least one mass media outlet that hedge funds should mind their own business and not by nosy about other hedge funds' trades. But a closer reading of the study suggests to us that it's extremely difficult to measure the vast array of social interactions in Hedgistan.


Study: Public pension funds in a dangerous race with one another. Should focus on liabilities first.

Mar 24th, 2011 | Filed under: Academic Research, Institutional Investing, Today's Post

A study of 125 U.S. state pension plans reveals that management incentives, misguided accounting standards and conflicting interests could perpetuate a funding gap roller coaster.


Are Brazil’s multimercado funds for Real?

Mar 17th, 2011 | Filed under: Academic Research, Hedge Fund Industry Trends, Today's Post

Brazil's "multimercado" funds are often described as a form of well-regulated hedge funds. But new research suggests that may be stretching the truth just a little.


Currency hedge funds found to outperform a random walk

Mar 15th, 2011 | Filed under: Academic Research, Hedge Fund Industry Trends, Today's Post

Currency markets basically follow a random walk. But according to a new study, the returns from currency hedge funds are anything but random.


Hedge funds and “stock manipulation”: Perpetrators, accomplices or just in the wrong place at the wrong time (again)?

Mar 2nd, 2011 | Filed under: Academic Research, Performance, Analytics & Metrics, Today's Post

A new study of stocks with high hedge fund ownership claims that something fishy is going on at the end of every month.


Managers operating in mature and “efficient” markets rejoice! Study finds you too can generate alpha.

Feb 22nd, 2011 | Filed under: Academic Research, CAPM / Alpha Theory, Today's Post

Thought managers in "inefficient markets" like emerging markets or small cap equities had the advantage when it comes to alpha-generation? Maybe not...


Hedge fund quandary: Choosing fame or just fortune?

Feb 8th, 2011 | Filed under: Academic Research, Performance, Analytics & Metrics, Today's Post

Do hedge funds really care about being the "best"?