After a market downturn, especially in an uncertain economic environment such as the current state, there can be a relatively long period with a sideways market, where indexes, stocks, etc., move in channels with support and resistance levels. We discuss option pricing in such scenarios, in both...

We characterize the distribution of long-term equity returns based on the historical record of stock market performance in a broad cross section of 39 developed countries over the period from 1841 to 2019. Our comprehensive sample mitigates concerns over survivorship and easy data biases that...

How do retail investors respond to the outbreak of COVID-19? We use transaction-level trading data to show that investors significantly increase their trading activities as the COVID-19 pandemic unfolds, both at the extensive and at the intensive margin. Investors, on average, increase their...

The Saudi Arabia Stock Exchange (Tadawul) is one of the biggest emerging Stock Exchanges in the Middle East region. Therefore, this research aims to apply Fama and French (2015) 5-factor model on Tadawul, and compares it with the Fama and French 3-factor model and CAPM to check the applicability...

Recent evidence indicates the value premium declined over time. In this paper, we argue this decline happened because book equity, BE, is no longer a good proxy for fundamental equity, FE, defined as the equity value originating purely from expected cash flows (i.e., no discount rate differences...

Levered and inverse ETPs are designed to provide geared long and short exposures to thedaily returns of different benchmark indexes. The benchmarks can be any reference index.The popular ones are on stocks, bonds, commodities and volatility. The problem with theseproducts is that they are not...

We explain in a nontechnical fashion why dollar-neutral quant trading strategies, such as equities Statistical Arbitrage, suffered substantial losses (drawdowns) during the COVID-19 market selloff. We discuss: (i) why these strategies work during "normal" times; (ii) the market regimes when they...

The purpose of this paper is to document and summarize factor returns related to the decline in the stock market due to COVID-19 (“the Coronavirus Crash”). Factor spreads from January 1, 2020 through March 31, 2020 are multiples of historical spreads. For example, the Value-Growth spread...

In out-of-sample trading tests, combined trading strategies based on the bond value model is able to raise the Sharpe ratio to 0.85, from the 0.78 achieved by a passive benchmark of 10-year government bonds equally weighted across 12 developed countries (US, Japan, Germany, UK, France, Italy,...

In a 2001 interview in Forbes, Warren Buffett suggested that the ratio of the market value of publicly traded stocks to economic output could identify potential equity market mispricings. This paper investigates the return-predictive characteristics of the market value of equity-to-gross...