We compare several representative sophisticated model averaging and variable selection techniques of forecasting stock returns. When estimated traditionally, our results confirm that the simple combination of individual predictors is superior. However, sophisticated models improve dramatically...

The tonality of news reporting has been shown to have explanatory and predictive power for equity prices. Using a novel approach and data set, we demonstrate that the news sentiment effect also holds for US government bond duration. We construct a successful trading strategy for the US 10-year...

You're probably familiar, at least in passing, with the 'convexity' of long-term bonds - i.e. that yields dropping 1% produce a bigger price move than yields rising 1%. A significant amount of brainpower has gone into understanding all the ramifications of this convexity in the fixed income...

News and sentiment in news often influence financial markets and asset prices. While this is well-recognized by investors, only few studies have used sentiment in news to predict future developments in financial markets to formulate alpha generating strategies, let alone create a best practice...

This paper studies the effectiveness of technical trading approaches in market environments of varying sentiment. Due to short-sale constraints, overpricing with high sentiment (i.e. relatively optimistic sentiment) is more prevalent compared to underpricing with low sentiment (i.e. relatively...

Feedback trading strategies have gained much popularity among researchers in the last decadesand are used to illustrate how new information based on returns is reflected in the markets. This paper extends previous studies by decomposing the overall return premium and introducing the global...

Continuously rebalanced long-short trades are similar to highly levered trades in that their PNL profile depends not only on the final distribution of return, but also on the realized co-variance structure of the asset pair. It's easily possible for both orientations of a rebalanced long-short...

The looming Savings Crisis is usually attributed to people either not saving enough or making poor investment choices, but we believe there's another culprit. Many investors could benefit from a 'free lunch' of pooling their longevity risk with others, but due to market inefficiencies, they do...

We are often asked for our estimate of the long-term return of the equity market. Our framework currently indicates 5.3% above inflation for global equities, which we know strikes many investors as high. This is understandable, given that the most available and frequently cited valuation ratio...