● Quantitative Momentum: A Practitioner’s Guide to Building a Momentum-Based Stock Selection System
By Wesley R. Gray and Jack R. Vogel
Summary via publisher (Wiley)
Quantitative Momentum brings momentum investing out of Wall Street and into the hands of individual investors. In his last book, Quantitative Value, author Wes Gray brought systematic value strategy from the hedge funds to the masses; in this book, he does the same for momentum investing, the system that has been shown to beat the market and regularly enriches the coffers of Wall Street’s most sophisticated investors. First, you’ll learn what momentum investing is not: it’s not ‘growth’ investing, nor is it an esoteric academic concept. You may have seen it used for asset allocation, but this book details the ways in which momentum stands on its own as a stock selection strategy, and gives you the expert insight you need to make it work for you. You’ll dig into its behavioral psychology roots, and discover the key tactics that are bringing both institutional and individual investors flocking into the momentum fold.
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Can We Intelligently Estimate Recession Risk?
Media chatter about economic recessions tends to come in three flavors. One is the rarely seen diligent species that considers how the macro trend is evolving currently, and may evolve over the next month or so, based on a diversified set of metrics. Then there’s the long-run forecast that makes a valiant effort to divine the future a year or more in advance. The third alternative, which is by far the most popular flavor, is to zero in on one or two indicators, usually as a prelude to declaring that the end is nigh… any day now. But only one of the three is relatively reliable while the other two can safely be labeled as lighted-hearted diversions bordering on entertainment.
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US Business Cycle Risk Report | 20 October 2016
The US economic trend remained positive through September: strong enough to keep recession risk at a low level but still too soft to fully dismiss concerns about the near-term outlook. Nonetheless, macro momentum has picked up a bit after decelerating earlier in the year—in line with the Capital Spectator’s recent projections (see links below). But as we’ll discuss, the near-term forecasts now point to a stable but relatively muted trend for the immediate future.
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US Real M0 Money Supply Contracts By The Most In 68 Years
In a sign that the Federal Reserve is still on track to raise interest rates, real (inflation-adjusted) M0 money supply declined 8.8% in September vs. the year-earlier level—the steepest annual slide since 1948, based on monthly data.
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Is Equal Weighting Beneficial For Asset Allocation? Part IV
Equal weighting asset allocation doesn’t look encouraging as a portfolio-design tool, based on last week’s preliminary analysis. Can we salvage equal weighting by expanding the opportunity set with a more granular mix of funds? In a word, no. As we’ll see, equal weighting across asset classes via a wider spectrum of funds doesn’t lead us to a different conclusion.
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REITs Rebounded Last Week Amid Widespread Losses Elsewhere
US real estate investment trusts (REITs) posted the first weekly gain since mid-September for the five trading days through Oct 14. Commodities (broadly defined) gained ground last week too. But everything else was in the red among the major asset classes, based on a set of proxy ETFs.
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Book Bits |15 October 2016
● The Man Who Knew: The Life and Times of Alan Greenspan
By Sebastian Mallaby
Review via The Economist
The former chairman of the Federal Reserve was once a hero. Now he is being called a villain. Yet it is too soon to be sure what history will say about him. In a superb new book, the product of more than five years’ research, Sebastian Mallaby helps history make up its mind about Alan Greenspan, the man hailed in 2000 by Phil Gramm, a former senator, as “the best central banker we have ever had”, but now blamed for the financial crisis of 2007-08. Even today, Mr Greenspan, who famously once told Congress that “If I seem unduly clear to you, you must have misunderstood what I said”, remains a paradoxical figure.
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Retail Sales Perk Up In September
US spending in retail establishments rebounded in September, rising 0.6% vs. the previous month—the strongest monthly gain since June, according to this morning’s release from the Census Bureau. The rise more than reverses the 0.2% decline in August. Meanwhile, the upbeat data lifted the year-over-year gain to 2.7%, a three-month high. In short, the worrisome profile of the retail sector in August pulled back from the brink.
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Is Equal Weighting Beneficial For Asset Allocation? Part III
The third installment of analyzing equal weighting for asset allocation reviews the results for maintaining identical weights for funds and asset classes. In the previous posts in this series (here and here), the equal weighting was applied to the funds but not the asset classes. As we’ll see, imposing a higher level of equality isn’t encouraging for an equal-weighted asset allocation.
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Rate-Hike Expectations Are Bubbling… Again
The prospect for a rate hike is resonating in the Treasury market. Is this another head fake? Or is the Federal Reserve truly ready to embrace another round of policy tightening? No one knows for sure at this point, including the Fed’s voting members. Much depends on how the economic reports fare between now and the December 13-14 FOMC meeting, when the central bank is expected to raise rates, based on Fed funds futures. No change is expected at the Nov. 1-2 meeting, however.
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