This week’s briefing brings together the most useful investment research and market insights I found over the past seven days, spanning academic studies, industry research, blogs, and social media. Links to every source are included.
Crypto
Skewness Illusion in Cryptocurrency Portfolios (Horvath and Rigamonti)
Crypto’s lottery-like payoff largely disappears with diversification. Across 2,359 coins, 96% have positively skewed weekly returns. But that skewness largely disappears once portfolios reach around 25 coins. As in equities, diversification washes out the extreme positive skew of individual assets. Key takeaway: Positive skewness is largely an individual-coin phenomenon, and not a feature of crypto portfolios.
Equities
Prior Sentiment and Returns Around Earnings Announcements (Kazemi and Makridis)
Investor sentiment before earnings predicts returns after the announcement, even after accounting for the earnings surprise. Across 83,293 U.S. earnings events, low-sentiment stocks had 1.38 percentage points higher abnormal returns than high-sentiment stocks over the next 10 days. The pattern holds after both earnings beats and misses. Key takeaway: Prior sentiment contains return information beyond the earnings surprise.
Across U.S. size, value, investment, and profitability portfolios, a single 12-month market momentum signal works better than calculating momentum separately for each portfolio. The best Sharpe comes from staying long when market momentum is positive and moving to cash otherwise, without volatility scaling. Key takeaway: Within equities, trade the market trend, not each portfolio’s own trend.
Sentiment and Return Predictability in Global Value Chains (Heckmann)
Across global equities, FinBERT sentiment from a firm’s customers and suppliers predicts its next-month returns beyond the firm’s own tone. Optimistic customers predict higher returns; optimistic suppliers often predict lower returns, consistent with greater input-cost pressure and bargaining power. Key takeaway: Customer optimism can be good news for a stock; supplier optimism can be bad news.
FX
Option-implied Hurst exponent for FX timing (Petric and Schadner)
FX options can tell investors when to take currency risk. Across 9 major currencies since 2001, using an option-implied Hurst measure derived from the volatility term structure to time FX exposure cut average volatility from 10.6% to 5.3% and max drawdown from 41.4% to 20.3% versus passive FX exposure. Key takeaway: FX option term structures seem useful for timing downside risk.
Options
The Price Impact of Hedging Expiring Index Options (Amaya, Garcia-Ares, Pearson, and Vasquez)
0DTE options can move the S&P 500 into the close through dealer hedge unwinding. On the highest- vs. lowest-dealer-delta days, S&P 500 futures returns differed by 17 bps over the final 30 minutes and 12.5 bps over the final 15 minutes. Key takeaway: Dealer delta in expiring options can create systematic price pressure into the close.
When Does Intraday Options Trading Predict Stock Returns? (Lin, Luo, and Shao)
Options traders seem to know more near the closing bell. Across 3,317 stocks, bullish options order imbalance in the final 30 minutes predicts higher next-day returns more than twice as strongly as the average 30-minute options order-imbalance measure. Key takeaway: For predicting next-day stock returns, late-day options positioning contains the strongest signal.
Trend Following
On the Anatomy of Trend (Kjaer)
Trend-following’s crisis performance is distinct from its average timing ability. Across 81 markets over 25 years, trend provides increasingly strong protection during large market declines. Yet, its signals show much less evidence of consistently timing subsequent returns. Key takeaway: Trend’s most robust feature is its downside protection, not its average timing ability.
Blogs
Wealth management with macro factors (Macrosynergy)
The Sharpe Stability Ratio: Evaluating the Sharpe Ratio Temporal Consistency (Portfolio Optimizer)
Interest Rate Surge? (John H. Cochrane)
Podcasts
Mebane Faber Interview with Michael Covel on Trend Following Radio (Michael Covel)
Why Trend Following Feels Wrong (But Could Boost Your Portfolio) (Meb Faber)
Learning from Buffett and Munger (Masters in Business)
Social Media & Industry Research
Elastic Expectations (Citadel)
Crazy days in the stock market (Acadian Asset Management, Owen Lamont)
Passive-Investing Boom is Making Life Harder for Stock Pickers (Justina Lee, Bloomberg)
What’s Pushing Long-Term Bond Yields Higher? (PIMCO)
Last Week’s Most Popular Links
Unexpected Gross Profit and Cross-Sectional Stock Returns (Yang, Cai, Rhee, and Wu)
VIX and Trend Following Revisited: Nearly a Decade of Out-of-Sample Evidence (Alpha Architect)
AgonAlpha: Autonomous Alpha Discovery via Prompt Economy and Scalable Agentic Search (Ye, Sun, Ren, Yu, Yi, and Yang)
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