Using leverage to magnify performance is an idea that has enticed investors and traders throughout history. The critical question of when to employ leverage and when to reduce risk, though, is not often addressed. We establish that volatility is the enemy of leverage and that streaks in...

We employ a wavelet approach and conduct a time-frequency analysis of dynamic correlations between pairs of key traded assets (gold, oil, and stocks) covering the period from 1987 to 2012. The analysis is performed on both intra-day and daily data. We show that heterogeneity in correlations...

This paper explores the utilization of text data as a new α return resource for individual stock investment. In particular, we propose a new construction scheme of a polarity dictionary based on ChatGPT, a state-of-the-art language model, which is also directly used for sentiment analysis. Our...

The objective of this paper is to provide a practical tool for stock price evaluation and forecasting under Extreme Value Theory (EVT). Three existing models are reviewed; these models include: Mordern Portfolio Theory, Black-Scholes, and Jarrow-Rudd models. It was found that these models may not...

In this short note, we show investors one way to calculate ideal investment sizing by using two rules of thumb based on a simple outline of individual risk aversion. We illustrate these two heuristics, which are not widely appreciated, with thought experiments involving coin flips and ketchup &...

Recent findings by Fama and French (2012) suggest a decreasing pattern of value premia alongside an increase in firm size. Large trading volumes of value investors often restrict their investment possibilities to large, liquid stocks and raise a serious issue if large cap value premia are...

Volatility is widely considered to be a category of technical indicators with a simple interpretation - no matter how it is measured volatility is widely believed to rise in a market downturn. This approach is applied to indicators such as the Average True Range (ATR), Bollinger Bands®...

Investors are periodically challenged with this question: with funds ready to invest, but faced with a market that is generally perceived to be expensive, is it better to wait for a market correction before investing? Many investors are certain that a correction must be around the corner, and...

Indices providing cost-efficient passive exposure to factors such as value, growth, momentum, small size or low volatility, and other non-cap-weighted indices such as high dividend yield, high quality, high and low beta or equal-weighted indices, are well known and widely used in practice as...