The midterm elections concluded yesterday. And that raises the question, what has historically happened in the market around this event? Using data from Bloomberg, we tested what happened if you had held the S&P 500 from one week before the election to one week after. From 1952 to this year, the annualized return was 30.8% […]

For as long as we have records, one of the most persistent findings in financial markets has been that options are expensive. Implied volatility tends to exceed subsequently realized volatility, creating a variance risk premium (VRP) that sellers can harvest. This has been documented across markets, instruments, and time periods. It is also the economic […]

One of the more pervasive ideas in finance is that information gets incorporated into prices quickly. A company releases news, investors digest it, they act, and the stock adjusts. Maybe not instantly, but fast enough that trying to make money from yesterday’s public information seems silly. A recent paper by Ryan Flugum, Kelley Bergsma Lovelace, […]

“Diversification is the only free lunch in investing.” -Harry Markowitz (Well, sort of…) Diversification is one of those investment ideas that everyone agrees with and almost nobody does well enough. Most investors diversify across stocks. More sophisticated investors diversify across asset classes. Even more sophisticated investors diversify across factors such as value, momentum and quality. […]

Stocks tend to perform unusually well around the end of one month and the beginning of the next. At first glance, the explanation appears almost absurdly simple: the calendar changes. That basic pattern has been documented for decades and across many countries. In “Infrequent rebalancing, risk deferral, and equity returns at the turn of the […]