Does CO trace H2 at high galactic latitude

A CO survey of 342 Infrared Excess Clouds (IRECs) distributed uniformly across the sky is presented. Following comparison of the integrated CO brightness with the 100 micron infrared brightness B(sub 4) obtained from the IRAS data, evidence was found for a threshold in B(sub 4) of 4-5 MJy sr(exp -1) below which CO does not form. Evidence is also presented that the threshold effect can be seen within an individual cloud, providing evidence for a phase transition between atomic and molecular gas. While the main thrust was to examine the CO content of the IRECs, it was also attempted to detect CO toward a number of UV stars so that CO brightness could be correlated with direct measurements of H2 column density and E(B-V). Of the 26 observed stars CO was detected toward 6. It is consistent with the results obtained using infrared data

Evaluating the performance of global emerging markets equity exchange-traded funds

We examine the performance of passively managed exchange-traded funds (ETFs) that provide exposure to global emerging markets equities. We find that the tracking errors of these funds are substantially higher than previously reported levels for developed markets ETFs. ETFs that use statistical index replication techniques turn out to be especially prone to high tracking errors, and particularly so during periods of high cross-sectional dispersion in stock returns. At the same time, we find no convincing evidence that these funds earn higher returns than ETFs that rely on full-replication techniques

The Molecular Gas Density in Galaxy Centers and How It Connects to Bulges

In this paper we present gas density, star formation rate, stellar masses, and bulge disk decompositions for a sample of 60 galaxies. Our sample is the combined sample of BIMA SONG, CARMA STING, and PdBI NUGA surveys. We study the effect of using CO-to-H_2 conversion factors that depend on the CO surface brightness, and also that of correcting star formation rates for diffuse emission from old stellar populations. We estimate that star formation rates in bulges are typically lower by 20% when correcting for diffuse emission. We find that over half of the galaxies in our sample have molecular gas surface density >100 M_sun pc^-2. We find a trend between gas density of bulges and bulge Sersic index; bulges with lower Sersic index have higher gas density. Those bulges with low Sersic index (pseudobulges) have gas fractions that are similar to that of disks. We also find that there is a strong correlation between bulges with the highest gas surface density and the galaxy being barred. However, we also find that classical bulges with low gas surface density can be barred as well. Our results suggest that understanding the connection between the central surface density of gas in disk galaxies and the presence of bars should also take into account the total gas content of the galaxy and/or bulge Sersic index. Indeed, we find that high bulge Sersic index is the best predictor of low gas density inside the bulge (not barredness of the disk). Finally, we show that when using the corrected star formation rates and gas densities, the correlation between star formation rate surface density and gas surface density of bulges is similar to that of disks.Comment: Accepted for publication in Ap

Global Tactical Cross-Asset Allocation: Applying Value and Momentum Across Asset Classes

In this paper we examine global tactical asset allocation (GTAA) strategies across a broad range of asset classes. Contrary to market timing for single asset classes and tactical allocation across similar assets, this topic has received little attention in the existing literature. Our main finding is that momentum and value strategies applied to GTAA across twelve asset classes deliver statistically and economically significant abnormal returns. For a long top-quartile and short bottom-quartile portfolio based on a combination of momentum and value signals we find a return of 12% per annum over the 1986-2007 period. Performance is stable over time, also present in an out-of-sample period and sufficiently high to overcome transaction costs in practice. The return cannot be explained by potential structural biases towards asset classes with high risk premiums, nor the Fama French and Carhart hedge factors. We argue that financial markets may be macro inefficient due to insufficient ‘smart money’ being available to arbitrage mispricing effects away

The Volatility Effect: Lower Risk without Lower Return

We present empirical evidence that stocks with low volatility earn high risk-adjusted returns. The annual alpha spread of global low versus high volatility decile portfolios amounts to 12% over the 1986-2006 period. We also observe this volatility effect within the US, European and Japanese markets in isolation. Furthermore, we find that the volatility effect cannot be explained by other well-known effects such as value and size. Our results indicate that equity investors overpay for risky stocks. Possible explanations for this phenomenon include (i) leverage restrictions, (ii) inefficient two-step investment processes, and (iii) behavioral biases of private investors. In order to exploit the volatility effect in practice we argue that investors should include low risk stocks as a separate asset class in the strategic asset allocation phase of their investment process

Benchmarking Benchmarks

Benchmarking benchmarks is a bundle of six studies that are inspired by the prevalence of benchmarking in academic finance research as well as in investment practice. Three studies examine if current benchmark asset pricing models adequately describe the cross-section of stock returns. We present a momentum strategy based on residual stock returns that vastly improves upon traditional momentum strategies, evidence that low-volatility stocks earn abnormally high risk-adjusted returns and a critical discussion of the recently proposed “fundamental indexation” approach. Two studies examine whether active asset allocation can add value over a benchmark strategic asset allocation (SAA) portfolio. We empirically find that value and momentum effects do not only exist within, but also across asset classes, and we present a practical framework for dynamic strategic asset allocation based on the business cycle. The final study examines whether benchmark index returns can actually be obtained in reality. We find that passive funds listed in Europe lag their benchmarks by a statistically and economically significant amount of 50-150 basis points per annum, as a result of expenses and dividend taxes. Based on the overall results we hypothesize that the phenomenon of benchmarking itself may lie at the root of some of our key findings and that the challenge is to adapt benchmarks in such a way that desired behavior is better encouraged

Residual Momentum

Conventional momentum strategies exhibit substantial time-varying exposures to the Fama and French factors. We show that these exposures can be reduced by ranking stocks on residual stock returns instead of total returns. As a consequence, residual momentum earns risk-adjusted profits that are about twice as large as those associated with total return momentum; is more consistent over time; and less concentrated in the extremes of the cross-section of stocks. Our results are inconsistent with the notion that the momentum phenomenon can be attributed to a priced risk factor or market microstructure effects