Risk Adjustment and Trading Strategies

Ahn, Dong-Hyun; Conrad, Jennifer; Dittmar, Robert F.

doi:10.1093/rfs/hhg001

Cited by 141 publications

(78 citation statements)

References 42 publications

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“…In this domain, understanding Livermore's "psychological time", "emotional control", and "money risk money -exit policy" is critical for market and securities evaluation and trading purposes (Livermore, 1940(Livermore, /2001Lefèvre, 1923Lefèvre, /2010 Asness, Moskowitz, and Pedersen (2013) the average intraday component of momentum profit is statistically insignificant. Their findings are subject to a number of controls and risk-adjustments (Ahn, Conrad, & Dittmar, 2003). According to these papers, as well as to the findings of the current paper presented in Tables 1-2 (Section 4), the overnight return time-series parameter is bigger among large-cap stocks, 3x ETF/ETN instruments, and stocks with relatively large prices (Vayanos & Woolley, 2013).…”

Section: Problem Introductionmentioning

confidence: 61%

The Leveraged ETF Inefficiency in Trending & Range-Bound Markets: An Application Case Study for a 3x Leveraged Gold Miners ETF

Basdekidou¹

2017

IJEF

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The main goal of this paper is to introduce the leveraged ETF die-down price action technical market anomaly (leveraged ETF anomaly), and then to discuss the temporal dimension and the subsequent (time-series) functionalities of this anomaly (temporal leveraged ETF anomaly). Our approach not only challenging the efficient-market hypothesis with regards to constantly declining leveraged ETF price action course, but also has a temporal dimension because it uses the Jesse Livermore's "psychological time" as parameter in both functions: (i) "emotional control" for opening position at the beginning of an intraday or short-term move and thereafter for holding this position; and (ii) in "money risk management -exit policy" for closing position. Traditional fundamental analysis theories and technical analysis rules and approaches are not able to interpret the die-down (i.e. a constantly declining in a mid-and long-term basis) leveraged ETF price action course. Instead, a rational dynamic and temporal representative agent could explain and document better this anomaly and this is the case of this article (i.e. trading exploitation functionality). The presented research shows that the proposed temporal leveraged ETF anomaly accumulates profit entirely overnight in sideways and in choppy markets, while in a trending market the profit occurs intraday. These findings for the leveraged ETF instruments reject classical theories of trending and sideways markets returns. Hence, (i) in a sideways or in a choppy market, a well designed overnight-position return strategy based on temporal leveraged ETF anomaly; and (ii) in a trending market, a well designed daytime-position return strategy based on temporal leveraged ETF anomaly as well, could gain benefit at the expense of hedgers and long-term investors respectively. After back-testing our research in available 5-year data for the JNUG 3x leveraged ETF (gold miners juniors), we found that overnight-position speculators, in sideways or choppy markets, profit from the proposed temporal leveraged ETF trading strategy approach at the expense of hedgers; and daytime swing traders, in trending markets, profit from the proposed temporal leveraged ETF trading strategy approach at the expense of long-term investors.

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Section: Problem Introductionmentioning

confidence: 61%

The Leveraged ETF Inefficiency in Trending & Range-Bound Markets: An Application Case Study for a 3x Leveraged Gold Miners ETF

Basdekidou¹

2017

IJEF

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“…Based on moving average, six technical trading strategies are generated i.e. MA (1,9), (1,12), (2,9), (2,12), (3,9) and (3,12) as used in (Brock et al, 1992;Zhu & Zhou, 2009). These trading strategies compare short (1-3 months) and long (9-12 months) moving averages to forecast the stock price trends.…”

Section: Moving Averagesmentioning

confidence: 99%

“…MOM (9) and MOM(12) momentum rules as used by (Ahn, Conrad, & Dittmar, 2003;Conrad & Kaul, 1998). If stock's current price increases than the level of 9 to 12 months before then trading rules recommend buy i.e.…”

Section: Momentummentioning

confidence: 99%

Do Macro-Economic and Technical Indicators Matter?- a Principal Component Analysis Approach for Equity Risk Premium Prediction

Hassan¹,

Aziz²,

Mushtaq³

2017

Eur. j. econ. bus. stud.

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Equity risk premium contains the property of reflecting the fundamental judgments of individuals regarding risk that might exists in the economic market and the price associated with that risk. For ERP forecasting, attention is also devoted to technical indicators apart from the macro-economic variables. A set of 14 technical and 14 macro-economic variables is selected for this purpose and based on a standard predictive regression framework; all forecasts are generated by regressing ERP on a constant and a lag of macro-economic or technical indicator. It is found that as compared to macro-economic variables technical indicators provide better indications about ERP estimates. By using National Bureau of Economic Research (NBER) data of business cycle expansion and recessions, relative strength of ERP predictability is also investigated and it is found more than twice for recessions as compare to expansions.

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“…The current article says that the EMH and RWH both ignore the realities of the markets (emotional factors), in that the participants are not completely rational and that current price moves are not independent of previous moves (Lou, Polk, & Skouras, 2016;Edelen, Ince, & Kadlec, 2015;Tsoutsoura, 2004;Ahn, Conrad, & Dittmar, 2003; Asness, Moskowitz, & Pedersen, 2013).…”

Section: Problem Introductionmentioning

confidence: 99%

Green Entrepreneurship & Corporate Social Responsibility: Comparative and Correlative Performance Analysis

Basdekidou¹

2017

IJEF

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In investment and trading, different CSR/CSE (Corporate Social Responsibility/Corporate Social Entrepreneurship) moral ethical firms, categorized in a number of groups, may be suitable for different financial instruments (i.e. USA sector ETFs) and different market volatility situations. For the purpose of this article we first (i) analyze the trading return performance of four CSR/CSE categories (in particular: green building, green products, green services, and green transportation); and then (ii) examine and comment the correlation between the market performance of a number of firms belonging in these four CSR/CSE categories and historical ETF market volatility. Finally, we (iii) suggest CSR firms as trading tools according to dominant market volatility. Other CSR/CSE categories (like: sustainability, executive sustainability, renewable energy, green IT, green ICT, etc.) would be examined in future research by following the introduced by this paper approach. Paper concludes that, in relatively less volatile markets the Green Transportation CSR/CSE ethical firms display better results. On the other hand, in strong market volatile situations it is better to trade Green Products CSR/CSE and Green Services CSR/CSE ethical firms. Finally, the Green Building CSR/CSE ethical firms are uncorrelated with the market volatility, as well as their performance is poor in all market cases.

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Risk Adjustment and Trading Strategies

Cited by 141 publications

References 42 publications

The Leveraged ETF Inefficiency in Trending & Range-Bound Markets: An Application Case Study for a 3x Leveraged Gold Miners ETF

The Leveraged ETF Inefficiency in Trending & Range-Bound Markets: An Application Case Study for a 3x Leveraged Gold Miners ETF

Do Macro-Economic and Technical Indicators Matter?- a Principal Component Analysis Approach for Equity Risk Premium Prediction

Green Entrepreneurship & Corporate Social Responsibility: Comparative and Correlative Performance Analysis

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