Investing Research Articles

Is the ability of artificial intelligence (AI) platforms such as ChatGPT to summarize and interpret large volumes of financial data altering investor trading behaviors and thereby changing financial markets? In the April 2025 revision of their paper entitled “ChatGPT and the Stock Market”, Jenny Stanco and Kee Chung examine the impact of ChatGPT on stock… Keep Reading

A subscriber asked about the lead-lag relationship between S&P 500 earnings and S&P 500 Index returns. To investigate, we relate actual aggregate S&P 500 operating and as-reported earnings to S&P 500 Index returns at both quarterly and annual frequencies. Earnings forecasts are available well in advance of returns. Actual earnings releases for a quarter occur… Keep Reading

…share repurchase announcements are now more reliable indicators of actual buyback activity, and consequent beneficial impact on earnings per share, than they were before 2004.

The “Most Admired Knowledge Enterprise” (MAKE) awards, based on opinions gathered from experts using the Delphi method (three or four rounds of the experts anonymously exchanging views), recognizes exemplary organizational knowledge management. Does the market consider this award, directly or indirectly, in valuing publicly traded MAKE award winners? In their September 2013 paper entitled “Capital Markets Valuation… Keep Reading

…investors systematically overvalue (undervalue) stocks when they expect earnings per share to be low (high). Their expectations exhibit conservatism bias with respect to both the downside and upside extremes.

Is the accruals anomaly still on solid ground? In their paper entitled “The Accrual Anomaly”, Patricia Dechow, Natalya Khimich, and Richard Sloan review the origin of and subsequent research on the accruals anomaly. They characterize accruals as “the piece of earnings that is ‘made up’ by accountants” as opposed to the balance coming from cash… Keep Reading

Can the U.S. stock market continue to deliver its historical return? In the preliminary draft of his paper entitled “A Pragmatist’s Guide to Long-run Equity Returns, Market Valuation, and the CAPE”, John Golob poses two questions: What long-run real return should investors expect from U.S. equities? Do popular metrics reliably indicate when the U.S. equity market is… Keep Reading

Which price-to-earnings ratio is best for screening stocks? In the November 2024 first version of his paper entitled “Forward Price-Earnings Ratio”, Luca Conrads compares the practical abilities of seven price-to-earnings ratios to predict S&P 500 returns (see the chart below for four of these seven): Conventional price-to-earnings (PE) – current price divided by prior-year actual… Keep Reading

Does the U.S. stock market respond predictably to Federal Open Market Committee (FOMC) announcements, typically released between 14:00 and 14:20 EST? In the August 2022 version of their paper entitled “The FOMC Announcement Reversal”, Tommaso Baglioni and Ruy Ribeiro examine the relationship between pre-FOMC announcement returns and post-FOMC announcement returns. Specifically, they test a reversal… Keep Reading

Can the large language model GPT-4 help investors make investment decisions? In their October 2023 paper entitled “Can ChatGPT Assist in Picking Stocks?”, Matthias Pelster and Joel Val conduct a live test during the 2023 second quarter earnings announcements of the value and timeliness of investment advice from GPT-4 augmented with WebChatGPT for internet access…. Keep Reading