What a Hedge Fund Manager’s Writing Style Says About Their Performance

“The establishment of a typical position entails (i) the purchase of a group or basket of equity securities that are intended to highly correlate to the S&P …

How well hedge fund managers describe their strategies in writing may say a lot about their performance, according to a new paper from four academic researchers.

A well-rounded vocabulary — defined in the paper as “lexical diversity” — could be an indication of better cognitive ability and trustworthiness, leading to higher returns, “superior” Sharpe ratios, lower volatility, and fewer regulatory and legal problems, according to University of Maryland’s Juha Joenväärä, University of Oulu’s Jari Karppinen, Singapore Management University’s Melvyn Teo, and University at Buffalo’s Cristian Tiu.

At the same time, strategy descriptions made up of overly long and convoluted sentences — “syntactic complexity” — could be a sign that managers “have something to hide,” Tiu, an associate professor of finance at the University at Buffalo School of Management, said Wednesday in a phone interview.

“It’s somewhat surprising because strategy descriptions aren’t something you expect to be that informative,” said Tiu. “They’re written once in the beginning of a fund’s life and the hedge fund could hire a marketing firm to write a description for them.”

[II Deep Dive: Hedge Funds with Strong, Powerful Names Attract the Most Money]

Still, Tiu and his three co-authors found ample evidence that expansive vocabularies were linked to higher returns, even after accounting for other possible causes of outperformance that would correlate with writing ability, such as the manager’s education. Overall, they found that hedge funds with the most lexically diverse strategy descriptions outperformed funds with the most lexically homogenous write-ups by 3.63 percent annually.

Funds with large lexicons also tended to “eschew idiosyncratic risk and tail risk,” the authors found, resulting in annualized residual volatility of 3.63 percent, compared to 4.19 percent for funds which used more repetitive language.

When examining hedge fund syntax, meanwhile, Joenväärä, Karppinen, Teo, and Tiu found that more elaborate sentence structures were tied to more regulatory actions, investment violations, and other civil and legal infractions.

For example, the authors quoted the strategy description of the Fairfield Sentry fund, which “gained notoriety as one of the feeders for Bernard Madoff’s fund.” According to the paper, one sentence of the strategy summary read as follows:

“The establishment of a typical position entails (i) the purchase of a group or basket of equity securities that are intended to highly correlate to the S&P 100 Index, (ii) the purchase of out-of-the-money S&P 100 Index put options with a notional value that approximately equals the market value of the basket of equity securities and (iii) the sale of out-of-the-money S&P 100 Index call options with a notional value that approximately equals the market value of the basket of equity securities.”

“This is the quintessential example of a fund whose strategy descriptive obfuscates rather than clarifies,” the authors argued.

In the phone interview, Tiu said that the findings could potentially be useful for investors looking to identify talented, trustworthy managers — or detect red flags. According to the study, investors might already suspect some connection between writing and investment abilities: The authors found that investors allocated more capital to funds with lexically diverse strategy descriptions compared to hedge funds with complex syntax.

“However, the capital that investors allocate to lexically diverse hedge funds is not sufficient to erode away their positive alphas,” the paper concluded.

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Bollinger Bands Signal Check on CBOE Global Markets Inc (CBOE) as $119.54 Is the Pivot

Investors tracking technical indicators on shares of CBOE Global Markets Inc (CBOE) may be focusing in on the 20-Day Bollinger Bands signal. After a …

Investors tracking technical indicators on shares of CBOE Global Markets Inc (CBOE) may be focusing in on the 20-Day Bollinger Bands signal. After a recent check, we have noted that the current reading is Hold. This short-term indicator may be used to help spot oversold and overbought conditions. The direction of the signal is presently Bearish. Tracking another signal, we can see that the 10-day moving average Hilo channel reading is currently Hold. This indicator calculates the moving average based on highs/lows rather than the closing price. The direction of this signal has been spotted as reading Rising.

Tackling the stock market may involve many different aspects. Investors may at times feel like they are on a wild ride. Sometimes there are extreme highs, and sometimes there are extreme lows. Figuring out how to best deal with fluctuations can help the investor’s mindset. Investors who are able to keep their emotions in check might be one step ahead of the rest. Being able to identify emotional weaknesses can help the investor avoid tricky situations when things get hairy. Keeping the stock portfolio on the profitable side may involve making decisions that require emotional detachment. When emotions are running high, it may impair the rational decision making capability of the investor.

CBOE Global Markets Inc (CBOE) currently has a standard deviation of -0.34. Standard deviation is defined as a measure of the dispersion from the mean in regards to a data set. When dealing with financial instruments, the standard deviation is applied to the annual rate of return to help measure the volatility of a particular investment. Watching the standard deviation may help investors see if a stock is primed for a major move. The stock’s current pivot is 119.54. The pivot point is typically used as a trend indicator. The pivot is the average of the close, low, and high of the prior trading period.

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CBOE Global Markets Inc (CBOE)) currently has a 6 month MA of 105.93. Investors may use moving averages for different reasons. Some may use the moving average as a primary trading tool, while others may use it as a back-up. Investors may be watching when the stock price crosses a certain moving average and then closes on the other side. These moving average crossovers may be used to help identify momentum shifts, or possible entry/exit points. A cross below a certain moving average may signal the beginning of a downward move. On the other end, a cross above a moving average may indicatet a possible uptrend. Investors may be focused on multiple time periods when studying moving averages. Zooming out a bit further, we have noted that the 9 month moving average is currently 102.99.

Investors may be tracking the average range on shares of CBOE Global Markets Inc (CBOE). The stock currently has a 9 day average range of 2.72. This a moving average of trading ranges over a 9 day time frame. With this value, higher numbers tend to occur at market bottoms while lower values may be spotted during extended sideways periods. Looking at the 9 day relative strength reading, we can see that the value is currently 58.35%. This technical momentum indicator compares the size of recent gains to recent losses helping to identify possible overbought and oversold conditions.

The opinion signal for the current session is 100% Buy for CBOE Global Markets Inc. Investors may also be watching the strength and direction of the opinion signals. The opinion direction is presently Strengthening. This is a measurement over the last three trading sessions that gives an indication of whether the latest recent price movement is following the signal. A Buy or Sell signal with a “Strongest” direction indicates that the signal is gaining strength. The opinion strength signal is presently reading Maximum. This is a longer-term measure verse the historical strength.

Tackling the stock market may involve many different aspects. Investors may at times feel like they are on a wild ride. Sometimes there are extreme highs, and sometimes there are extreme lows. Figuring out how to best deal with fluctuations can help the investor’s mindset. Investors who are able to keep their emotions in check might be one step ahead of the rest. Being able to identify emotional weaknesses can help the investor avoid tricky situations when things get hairy. Keeping the stock portfolio on the profitable side may involve making decisions that require emotional detachment. When emotions are running high, it may impair the rational decision making capability of the investor.

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Is Vanguard Growth & Income Investor (VQNPX) a Strong Mutual Fund Pick Right Now?

Vanguard Group is based in Malvern, PA, and is the manager of VQNPX. Since Vanguard Growth & Income Investor made its debut in December of …

Large Cap Blend fund seekers should consider taking a look at Vanguard Growth & Income Investor (VQNPX). VQNPX has a Zacks Mutual Fund Rank of 2 (Buy), which is based on nine forecasting factors like size, cost, and past performance.

Objective

We note that VQNPX is a Large Cap Blend option, an area loaded with different options. More often than not, Large Cap Blend mutual funds invest in companies with a market cap of over $10 billion. Buying stakes in bigger companies offer these funds more stability, and are well-suited for investors with a ” buy and hold ” mindset. Additionally, blended funds mix large, more established firms into their portfolios, giving investors exposure to value and growth opportunities.

History of Fund/Manager

Vanguard Group is based in Malvern, PA, and is the manager of VQNPX. Since Vanguard Growth & Income Investor made its debut in December of 1986, VQNPX has garnered more than $2.89 billion in assets. The fund’s current manager is a team of investment professionals.

Performance

Of course, investors look for strong performance in funds. This fund carries a 5-year annualized total return of 10.95%, and is in the top third among its category peers. But if you are looking for a shorter time frame, it is also worth looking at its 3-year annualized total return of 12.62%, which places it in the top third during this time-frame.

When looking at a fund’s performance, it is also important to note the standard deviation of the returns. The lower the standard deviation, the less volatility the fund experiences. The standard deviation of VQNPX over the past three years is 12.3% compared to the category average of 10.66%. Looking at the past 5 years, the fund’s standard deviation is 11.96% compared to the category average of 10.77%. This makes the fund more volatile than its peers over the past half-decade.

Risk Factors

It’s always important to be aware of the downsides to any future investment, so one should not discount the risks that come with this segment. In VQNPX’s case, the fund lost 51.95% in the most recent bear market and underperformed its peer group by 3%. This might suggest that the fund is a worse choice than its peers during a bear market.

Investors should not forget about beta, an important way to measure a mutual fund’s risk compared to the market as a whole. VQNPX has a 5-year beta of 0.99, which means it is likely to be as volatile as the market average. Alpha is an additional metric to take into consideration, since it represents a portfolio’s performance on a risk-adjusted basis relative to a benchmark, which in this case, is the S&P 500. VQNPX has generated a negative alpha over the past five years of -0.28, demonstrating that managers in this portfolio find it difficult to pick securities that generate better-than-benchmark returns.

Holdings

Examining the equity holdings of a mutual fund is also a valuable exercise. This can show us how the manager is applying their stated methodology, as well as if there are any inherent biases in their approach. For this particular fund, the focus is principally on equities that are traded in the United States.

As of the last filing date, the mutual fund has 83.57% of its assets in stocks, with an average market capitalization of $225.66 billion. The fund has the heaviest exposure to the following market sectors:

  1. Technology
  2. Finance

Turnover is 146%, which means this fund makes more trades per year than the comparable average.

Expenses

For investors, taking a closer look at cost-related metrics is key, since costs are increasingly important for mutual fund investing. Competition is heating up in this space, and a lower cost product will likely outperform its otherwise identical counterpart, all things being equal. In terms of fees, VQNPX is a no load fund. It has an expense ratio of 0.33% compared to the category average of 0.96%. From a cost perspective, VQNPX is actually cheaper than its peers.

Investors need to be aware that with this product, the minimum initial investment is $3,000; each subsequent investment needs to be at least $1.

Bottom Line

Overall, Vanguard Growth & Income Investor ( VQNPX ) has a high Zacks Mutual Fund rank, and in conjunction with its comparatively strong performance, average downside risk, and lower fees, this fund looks like a good potential choice for investors right now.

For additional information on this product, or to compare it to other mutual funds in the Large Cap Blend, make sure to go to www.zacks.com/funds/mutual-funds for additional information. If you are more of a stock investor, make sure to also check out our Zacks Rank, and our full suite of tools we have available for novice and professional investors alike.


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Insiders Have Increased Positions in: 3D Systems Corporation (NYSE:DDD)

According to the latest filings with the SEC, company insiders at 3D Systems Corporation (NYSE:DDD) have increased their position in the stock by …

According to the latest filings with the SEC, company insiders at 3D Systems Corporation (NYSE:DDD) have increased their position in the stock by 1.68% over the past 6 months. Insiders now own 1.60% of total outstanding shares.

When dealing with the volatility and unpredictability of the stock market, investors may have to learn how to deal with their emotions. There are many factors that can have a big impact on the portfolio. Maintaining discipline can be one of the most important factors. From time to time, investors will be overcome by fear during a large market selloff. On the other side, investors may become extremely excited during a widespread market move to the upside. When these situations occur, investors tend to make better decisions if they are able to keep emotions out of play and stick to the original plan. Buying and selling at the wrong time can lead to portfolio underperformance, and it may damage investor confidence in the future.

University of Michigan professor and noted insider trading researcher discovered that when insiders bought shares of their own companies, the stocks outperformed the total market by 8.9% over the next 12-month period. When they sold shares, the stock underperformed 5.4%.

3D Systems Corporation (NYSE:DDD) stands -16.23% away from its 50-day simple moving average and also -32.97% away from the 200-day average. Recently, the equity stands -67.86% away from the 52-week high and 8.28% from the 52-week low. The RSI (Relative Strength Index), an indicator that shows price strength by comparing upward and downward close-to-close movements is 35.23.

Wall Street analysts on the sell-side covering shares of 3D Systems Corporation (NYSE:DDD) have a mean recommendation of 3.30 on the shares. This is based on a numerical chart where each stock recommendation (Buy,Sell,Hold) is translated into a numerical equivalent. A low number indicates a Buy and a higher number a Sell. In terms of where analysts see the stock headed, they have a consensus price target of $8.25 on the shares.

Investors are constantly trying to gain any little advantage when it comes to the stock market. Setting realistic goals and staying disciplined when trying to attain those goals can have a positive impact on an investor’s psyche and portfolio performance. Making a couple of badly timed trades can have a drastic effect on the mindset of the investor or trader. Sometimes, investors will have a few missteps that generally include buying when the market is too high, selling when the market is low, or being on the sidelines during a major charge higher. Staying disciplined can help the average investor avoid common pitfalls to help keep the focus in the right direction. When inevitable mistakes are made, investors will have the opportunity to learn from those mistakes and get back on the road to recovery.

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Lattice Semiconductor Corporation (NASDAQ:LSCC) Shifts 8.73% For the Week

Lattice Semiconductor Corporation (NASDAQ:LSCC) shares saw the needle move 8.73% on the week. The stock closed the most recent session at …

Lattice Semiconductor Corporation (NASDAQ:LSCC) shares saw the needle move 8.73% on the week. The stock closed the most recent session at $20.19 after seeing 69107 shares trade hands. This represents a change of -0.05% from the opening.

Traders may be using technical analysis to help spot ideal entry and exit points. One idea behind technical analysis is that historical price movement trends have the ability to repeat themselves. Technical analysis involves the use of chart patterns to examine market movements and to help define trends. Trends in the stock market are not always easy to spot. Many chartists will strive to determine whether the trend is up, down, or sideways. After defining a trend, the technical analyst may look to see what type of timeframe the trend encompasses. Some traders will look to identify whether the trend is major or long-term, short-term, or intermediate. Being able to decipher what the data is saying may assist the trader with finding potential entry and exit points on a particular trade. There are many different indicators that can be employed when undertaking technical analysis. Many traders will do numerous chart studies to find out which indicator or indicators tend to project the most relevant trading assistance. Learning how to spot these trends might help the trader develop specific charting skills that will hopefully lead to future market success.

Investors are often dealing with the decision of whether to sell a stock that has been a solid performer or hold on to it for more profit. This can be almost as trying as deciding when to buy a certain stock. Once investors have latched on to a certain stock, they may find it hard to let go. On the flip side, investors may also have to deal with cutting ties with a losing stock. With both scenarios, it may be important for investors to try to keep emotion out of the decision making process. Investors may feel that giving up on a losing stock can be admitting that a mistake was made. No matter what the circumstance, not letting go of a losing stock may lead to poor portfolio performance in the long run. Constantly keeping a close watching on fundamental and technical data can provide important information needed to stay afloat in the equity markets.

As the next earnings season comes into focus, investors will be keeping watch on the performance of companies that they own. A company that continually exceeds earnings projections is most likely on the right track. On the other end of the spectrum, a company that frequently misses earnings projections might provide some insight to the fact that something isn’t right. Although it is important to keep track of earnings estimates and results, it shouldn’t be the only thing that the investor is looking at regarding the stock. Just because a company misses or beats expectations for one quarter may not mean anything super special. Tracking performance over a longer period of time can help paint the bigger picture of what is going on with the company. Sharp investors often have the ability to look deeper into the numbers to see the actual causes of an earnings hit or miss. Of course estimates are just that, estimates, and some analysts may be more accurate than others.

RECENT PERFORMANCE

Let’s take a look at how the stock has been performing recently. Year to date Lattice Semiconductor Corporation (NASDAQ:LSCC) is 189.88%, 69.43% over the last quarter, and 69.43% for the past six months.

Over the past 50 days, Lattice Semiconductor Corporation stock’s -3.40% off of the high and 49.56% removed from the low. Their 52-Week High and Low are noted here. -3.40% (High), 275.08%, (Low).

Investors are constantly looking to find winning stocks that have been largely overlooked. With markets still riding high, this may not be the easiest thing in the world right now. Finding those perfect stocks before they become household names may take a lot of research and homework. Many investors will apply various strategies for picking stocks. If there was one that worked for everybody, it would make things super easy. Of course, this is not the case. Obviously, there are no guarantees in the stock market. Some investors may only focus on the fundamentals of a company and completely ignore the technicals. Others may choose to only watch technicals and never take a look at the underlying company information. Combining both areas of research may help give a better feel of what is going on with the stock in the long term and the short term. Individual investors who manage their own portfolios may need to put in a lot more time than those who don’t. Successful investors often have an uncanny way of filtering out the noise and keeping their focus on the right information.

RSI

Investors often have a large selection of stocks to research when looking to add to the portfolio. Investors have the ability to employ many different strategies to help beat the stock market. In the end, the main goal is typically to maximize profits while minimizing risk. Investors commonly strive to diversify the portfolio in order to minimize risk. Most serious investors are well aware of the risks when entering the equity market. Investors may choose to own stocks across multiple industries to keep from having all the eggs in one basket. Others may choose companies of different size, and even delve into foreign markets. Finding those hidden gems in the stock market may not be the easiest of chores. Investors may have to spend many hours doing the research and crunching the numbers.

Lattice Semiconductor Corporation (NASDAQ:LSCC)’s RSI (Relative Strength Index) is 70.08. RSI is a technical indicator of price momentum, comparing the size of recent gains to the size of recent losses and establishes oversold and overbought positions.

Investors often have a large selection of stocks to research when looking to add to the portfolio. Investors have the ability to employ many different strategies to help beat the stock market. In the end, the main goal is typically to maximize profits while minimizing risk. Investors commonly strive to diversify the portfolio in order to minimize risk. Most serious investors are well aware of the risks when entering the equity market. Investors may choose to own stocks across multiple industries to keep from having all the eggs in one basket. Others may choose companies of different size, and even delve into foreign markets. Finding those hidden gems in the stock market may not be the easiest of chores. Investors may have to spend many hours doing the research and crunching the numbers.

Nothing contained in this publication is intended to constitute legal, tax, securities, or investment advice, nor an opinion regarding the appropriateness of any investment, nor a solicitation of any type. The general information contained in this publication should not be acted upon without obtaining specific legal, tax, and investment advice from a licensed professional.

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