Meb Faber Research – Stock Market and Investing Blog

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...

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...

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...

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...

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...

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?

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...

A wonderful paper scheduled for April publication in the Journal of Finance takes a new twist on the Dogs of the Dow strategy. The paper, by Boudoukh, Michaely, Richardson, and Roberts is titled, "On the Importance of Payout Yield". SmartMoney magazine also has a good overview of the paper in their "Stockscreen" column.In an earlier post we examined a...

Here are the updated portfolios for the Hedge Fund Consensus, and Activist Consensus Portfolios. Performance from 12/31/2006 - 2/21/2007 is below:Hedge: 5.76%Activist: 2.61%SP500: 2.72%Rus2k: 4.79%AMP was the best HFC stock up 24.29%, and the worst performner was AXP at -3.66%.AKS was the best AC stock up 26.27%, and the...

In addition to the regular portfolios I track, I am going to add one that updates monthly reflecting the logic from my paper "A Quant Approach to Tactical Asset Allocation."I labeled it GTAA (Global Tactical Asset Allocation) and I will update it at Stockpickr here.