Each week, I highlight some of the most compelling investment research published over the previous seven days, drawing on academic papers, industry research, and investment blogs. For those interested in digging deeper, links to the original publications are provided.
Crypto
Jump Risk Premiums in Cryptocurrency Returns (Lee and Wang)
In crypto, greater exposure to positive crypto-market jumps predicts lower future returns. Studying 100 cryptocurrencies, the authors find that coins with high positive jump betas underperform those with low betas by 0.87% per week (equal-weighted). The effect survives standard risk controls and is strongest when retail investor sentiment is high. Investors seem willing to accept lower expected returns for lottery-like upside exposure.
Equities
Testing the Shiller CAPE Ratio Across 140 Years of U.S. Stock Market Data (Kotian)
Does the Shiller CAPE ratio really predict long-term stock returns? Using 140 years of US market data, the author finds that a higher CAPE predicts lower subsequent 10-year real returns, even after correcting for overlapping observations. However, predictive accuracy varies sharply across market regimes, with particularly poor performance during the 1990s bull market. CAPE helps forecast long-term returns, but its predictive power is far from stable.
Pricing the Next Surprise: Earnings Persistence and the Post-earnings Drift Window (Bonaparte)
Much of post-earnings announcement drift seems to reflect anticipation of future earnings rather than underreaction to past news. Analyzing 475,690 US earnings announcements, the author finds that controlling for the next quarter’s earnings surprise reduces the conventional 60-day drift coefficient by 58%. Moreover, about 58% of the price response to the next earnings surprise occurs before its announcement.
Infrastructure ETFs: Factor Exposures, Regime Risk, and Portfolio Roles (Feng and Meng)
Not all infrastructure ETFs offer the same exposure. Studying 48 US-listed ETFs, the authors find significant differences in risk, but no statistically significant differences in returns or alphas across seven categories. Owner/operator funds have a median market beta of 0.67 and volatility of 14%, compared with 1.14 and 24% for infrastructure development funds. ETFs carrying the same infrastructure label can have very different risk profiles.
Fixed Income
Buying Duration: Index Rebalancing and Price Pressure in Government Bond Markets (Martinetti, Soebhag, and Verwijmeren)
Nearly half of government bond futures’ average monthly returns occur on the last trading day of the month. Analyzing US and German bond futures from 2003–2024, the authors find that month-end accounts for 47% of average monthly returns. The mechanism is mechanical: Benchmark-constrained investors buy duration as bond indices rebalance, pushing prices higher before the index pricing snapshot. Prices partially reverse afterward.
Geoeconomic Fear and Sovereign Spreads (Ding, Huang, Jiang, and You)
Geoeconomic fear predicts emerging-market sovereign bond spreads. Using GPT-4o-mini to analyze over 1 million WSJ articles, the authors construct a fear index covering tariffs, sanctions, and export controls. A 1-standard-deviation increase predicts roughly 2 percentage points wider spreads one month ahead. The effect holds out of sample and is concentrated in speculative-grade debt.
Volatility
Bespoke Realized Correlations for Multivariate Volatility Prediction (Kotehne and Patton)
Not all intraday returns are equally informative for forecasting risk. Using 15-minute data on roughly 360 S&P 500 stocks, the authors find that optimally weighting intraday observations improves out-of-sample volatility and correlation forecasts. Later trading hours matter most for volatility, while midday matters most for correlations. Calmer trading periods also receive greater weight.
Blogs
Do Stocks Rally Into Midterm Elections? A Century of Evidence (Quantseeker)
The Questions That Change Everything (Robot Wealth)
Built to Survive the Waiting (Alpha Architect)
Why Long Bonds Still Belong in the Portfolio (Beyond Passive Investing)
Podcasts
The Questions that Change Everything - Kris Longmore (The Algorithmic Advantage)
Philip & Allan Maymin – Compounding Through Risk, Not Return (Flirting with Models)
Trend Following Thinking (Michael Covel)
36% of Your Portfolio Just Disappeared In the Last 30 Years (Andrew Ang Explains How) (Meb Faber Show)
Social Media & Industry Research
Not All Quants Are Alike: Exploring Where Equity Alpha Comes From (Goldman Sachs)
Convexity You Can Afford (Yoav Git)
France – A Matter of Heightened Interest (Citadel)
Last Week’s Most Popular Links
The Evolution of Quantitative Equity Investing: Half a Century of Alpha Research and Institutional Adaptation (Feng, Cardozo, and Xia)
Profit Growth and Expected Stock Returns (Ahn, Black, Huang, Lord, Rizova, and Saito)
Is the Value Premium Dead? Forecasting Value–Growth Cycles with the Implied Value Premium (Li, Ng, and Swaminathan)
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