We contrast the time-series and cross-sectional performance of three popular investment strategies: carry, momentum and value. While considerable research has examined the performance of these strategies in either a directional or cross-asset settings, we offer some insights on the market...

A mechanical rebalancing strategy, such as a monthly or quarterly reallocation towards fixed portfolio weights, is an active strategy. Winning asset classes are sold and losers are bought. During crises, when markets are often trending, this can lead to substantially larger drawdowns than a...

The existing replication policies at top finance journals are far weaker than the policies at top economics journals. This paper explores both the costs and benefits of having a stronger replication policy in the context of my failed 2010 initiative to develop a unified policy across all top...

The “real” price of gold in the U.S. is historically high, relative to its history as an actively tradable asset. But what about the real price of gold in other countries? It turns out that, in our impressionistic sample of 23 countries, the real price of gold is high everywhere. The real...

In this era of inexpensive computation and vast data, systematic, or algorithmically driven, investment is increasingly popular. Systematic strategies appear in stand-alone products as well in tail-hedging and defensive-overlay strategies. Indeed, given the enormous growth in data, it is...

Impact costs occur when large buy or sell orders move market prices. The measurement of these costs is crucial for the evaluation of potential trading strategies as well as the successful execution of systematic investment strategies. However, common approaches suffer from a type of myopia:...

While a routinely rebalanced portfolio such as a 60-40 equity-bond mix is commonly employed by many investors, most do not understand that the rebalancing strategy adds risk. Rebalancing is similar to starting with a buy and hold portfolio and adding a short straddle (selling both a call and a...

We propose a novel theory that brings to light three fundamental performance drivers of zero-cost systematic investment strategies: (1) high (positive) own-asset signal-return predictability; (2) low (or negative) cross-asset signal correlation; and (3) low (or negative) cross-asset...

We document and quantify the negative impact of trend breaks (i.e., turning points in the trajectory of asset prices) on the performance of standard monthly trend-following strategies across several assets and asset classes. In the years of the U.S. economy’s expansion following the global...

Investors face a number of challenges when seeking to estimate the prospective performance of a long-only investment in commodity futures. For instance, historically, the average annualized excess return of individual commodity futures has been approximately zero and commodity futures returns...