Darrol J. Stanley

Using VIX Entropy Indicators for Style Rotation Timing

In this article, the authors examine the feasibility of market timing between large-capitalization value and growth portfolios with the use of entropy measures as compared with previously tested methods of market timing using stock market volatility (using the CBOE’s Volatility Index, VIX). Including transaction fees, style rotations using entropy measures appear to provide superior risk-adjusted returns and may offer a desirable alternative strategy for risk-averse investors seeking equity exposure.

Stock Market Timing with Entropy

We examine the effectiveness of entropy analytics for stock market timing. The objective behind the study is to develop and facilitate market timing procedure by introducing a relatively untested investment methodology that could be pragmatically utilized in investment management. As an example, we implement sample entropy analysis on the Dubai index series. We find that sample entropy-based trading strategies deliver better risk-adjusted performance than the index buy and hold strategy during the back-testing period, which also included highly volatile market returns.

A comparative modelling analysis of firm performance

The ongoing financial and economic crisis throughout the industrialised world has spotlighted a number of significant deficiencies in corporate governance and management. The strength and composition of the management team along with effective corporate governance policy should play an important role in addressing these challenges. The purpose of this paper is to illustrate how analytics can be used to identify the importance of specific organisational factors that could impact corporate performance. A WRDS database consisting of a variety of factors was examined using Logit, neural net and CART modelling techniques. The results from the analysis indicate that diversity and governance policies appear to have played only a modest role in explaining corporate performance as measured by Tobins Q for the year 2004.

The efficient market hypothesis: the applicability of quantitative methods to foreign stocks traded as American depository receipts (ADRs)

The efficient market hypothesis assumes each securitys price remains at continuous parity with its investment value. This presumption elicits challenge. The efficient market hypothesis denies that mechanical trading rules from either price or fundamental data are investment strategies capable of outperforming market averages on a risk-adjusted basis after transaction costs. US academic literature is now presenting contrary evidence. Vigorous investigations into alleged validity of the efficient market hypothesis challenge scholarly investigators to uncover pockets of inefficiency in their attempts to disprove market efficiency. This study cited two noted anomalies from the US markets. The two analyses were applied to the American depository receipt stock market to determine whether these anomalies likewise exist. This study investigates the weak-form through a price momentum reversal and volume strategy. Further, it investigated a semi-strong form EMH through a mechanical trading strategy of price momentum reversal and value and earnings momentum. The study period was for ten years ending December 31, 2011 incorporating monthly rebalancing equally-weighted. Results were formulated on a total return basis and expressed on a geometric basis. The top monthly weak-form portfolio supported the efficiency of the market. The top monthly semi-strong portfolio indicated a pocket of exploitable inefficiency.

The investment value of analysts’ recommendations: evidence from the dartboard contest

Briefly reviews previous research on the value of investment advisors’ recommendations and presents a study comparing portfolio returns from analysts’ recommendations in the Wall Street Journal’s “Dartboard” contest 1990‐1996, four randomly selected shares and the Dow Jones Industrial Average. Finds the analysts’ portfolio has the highest average returns and standard deviation; and that although some individual analysts have excellent scores in the contest, this is inversely related to the number of times they participate. Suggests that they do not significantly outperform other portfolios, but that contest winners’ tips have significant effects on the market, especially for non‐listed shares. Assesses the implications of the results for the efficient market hypothesis and the share prices of firms with higher asymmetric information.

Applicability of American stock market anomalies to international investing

This paper examines five factors--four fundamental and one technical--to provide evidence of growing similarities in four international equity markets: Europe, Japan, Europe/Japan, and the U.S. This reviewer is in general agreement with the findings, although several matters should be addressed to strengthen the paper. First, excessive market aggregation ignores the issue of capital market segmentation. All European bourses are combined to form a single market, and the Europe/Japan category is a redundant combination that could be dropped without affecting the conclusions. Additionally, the U.S. market (regardless of the factor) overwhelmingly outperforms all other markets, tending to highlight dissimilar components of the comparison. Finally, the 1991-94 period is long enough to provide comparison, but not long enough to establish a trend.