Biotech Stock Performance Around Critical Events

In her 2001 book "From Alchemy to IPO" Cynthia Robbins Roth cites a Hambrecht & Quist study of biotech stock movement surrounding clinical trial results (Phases I-III) and FDA approvals. The study examined the 12 months prior to and following the "event".Is anyone aware of such a study performed elsewhere that is more recent and/or comprehensive (I remember the...

Cross-Market Momentum Follow Up

Kudos to CXO who summarized the paper "Class OutPerformance (COP) Strategy". The author studied the effects of 1 year rolling cross-market momentum strategy updated monthly with 50 asset classes. Similar to my findings, the portfolio consisting of the top 20% of the asset classes outperformed the S&P500 with less risk. You can read the paper here.

Mean Reversion Follow-Up (Or, the Political Uncertainty Portfolio)

In a previous study, I examined the results of investing in equity markets when they experienced negative years X years ago. The chart below re-summarizes those findings:Were there any global equity markets that were down in 2004 or 2005? I track roughly 50 countries, and the results are below:Iran (2005)Peru (2004, just barely)Thailand (2004, and 2006)Venezuela (2005)The only country,...

Option Selling Funds

Are option selling funds a blowup waiting to happen?For the past few years there has been a proliferation in option selling CTAs. These funds, while wildly different in their trading methodology, generally sell options on the US stock indices. This tactic produces very strong risk adjusted numbers - as evidenced by these funds dominating the Sharpe rankings...

Best Ideas Hedge FOF

I have examined a few different ways of cobbling together portfolios from hedge fund 13Fs:1. Consensus - Putting together a portfolio of names that are owned by multiple funds.2. Replication - Replicating a single fund with its top 10 holdings.3. Conviction - The Morgan Stanley study that bought companies with a high %age of their shares owned by a...

Got That Sinking Feeling?

The equity markets took a big whoosh down today, and many other asset classes suffered as well:That's what market pundits talk about when they say that all correlations go to 1 when the market is declining. Bonds were up on the day, but that's not much solace when your equity funds are down 4%. As taken up by Nelson...

The Long Lasting Momentum in Weekly Returns

Link to this paper is here. "While prior studies examine the performance of stocks with extreme weekly returns for only a few weeks, which is the duration of the reversal, momentum profits emerge several weeks after an extreme return and persist over the remainderof the year. The momentum that we document easily offsets the brief and initial reversal in...

Holy Betas!

Are hedge funds returning great performance, or is it merely an illusion and they're selling world betas in disguise?Having examined how the timing model holds up against the Harvard and Yale endowments, how would it compare to the other brightest minds(and highest paid)in the room? In an earlier post, I examined the structure and characteristics of hedge fund databases...

Just a Thought

Out of the 11 guru portfolios on The Kirk Report (Swensen, Stein, etc) not a single one had any allocation to commodities...Swensen, who places 30% of his endowment in Real Assets, doesn't recommend it for the retail investor. . .Why not?

Formula Research

Some of my work was featured in the last issue of Formula Research. If you have not heard of this newsletter, it is the only one I subscribe to (long before this issue) and I highly recommend it. Nelson Freeburg does a great job of tackling quant systems, and has been doing so for years. For...