INVESTING/PORTFOLIO STRATEGIES

2 take home Markowitz prize for paper on accelerated stock price increases

James X. Xiong and Roger G. Ibbotson were named winners of the $10,000 Harry M. Markowitz Award for their paper “Momentum, Acceleration, and Reversal,” the Journal of Investment Management and New Frontier Advisors announced in a joint statement Wednesday.

Mr. Xiong is head of quantitative research for Morningstar Investment Management and Mr. Ibbotson is chairman and chief investment officer at Zebra Capital Management and a professor of finance at Yale School of Management.

Their paper analyzes the impact of accelerated stock price increases on future performance, according to the statement.

“Accelerated stock price increases are a strong contributor to both poor future performance and a higher probability of reversals. It implies that accelerated growth is not sustainable and can lead to drops. The acceleration mechanism is also able to reconcile the well-documented 2-12 month momentum phenomenon and 1-month reversal,” the paper’s abstract said.

The awards, which recognize the impact of Mr. Markowitz’s work as a financial economist and mathematician in both theoretical and applied finance, are sponsored by New Frontier and the JOIM. Winners were selected by a panel of Nobel laureates in economics, consisting of Mr. Markowitz, Robert C. Merton, Myron S. Scholes and William F. Sharpe.

The panel also recognized two additional papers with special distinction awards.

Special distinction was awarded to Mr. Markowitz, principal of Harry Markowitz Co. and an adjunct professor of finance, Rady School of Management, University of California San Diego, for his paper “Consumption, Investment and Insurance in the Game of Life,” which proposes a “Game of Life” simulator in which “portfolio selection is just one type of move in the financial actions of a subject household,” according to the statement. The award comes with a $5,000 prize.

Mr. Markowitz abstained from voting on his own paper, a JOIM spokesman said.

Special recognition and a $5,000 prize was also awarded to four other authors for their paper, “Investing with Style,” which details how to use four investment styles — value, momentum, carry and defensive — to “improve the risk and return of traditional portfolios,” the paper said. The authors are Clifford S. Asness, co-founder and managing principal at AQR Capital Management; Antti Ilmanen and Ronen Israel, both principals at AQR; and Tobias J. Moskowitz, a finance professor at University of Chicago’s Booth School of Business.

The awards are scheduled to be presented March 7 at a JOIM conference in Rohnert Park, Calif.