Investing Research Articles

…evidence from detailed Chinese stock account data indicates that the trading of unsophisticated individuals tends to transfer their wealth to institutions and more sophisticated individuals (and to brokers and the government).

…non-financial firms with high levels of cash tend to use the cash for risky growth, earning higher average stock returns with higher beta. Trading frictions from rebalancing to capture the abnormal returns would tend to offset the alpha.

…options buyers (sellers) might want to tilt toward stocks with high (low) betas, large (small) market capitalizations, low (high) book-to-market ratios and significant (no) momentum.

…traders may have difficulty exploiting mispricing of stocks based on analyst disagreement about future earnings, because mispricing and trading friction rise and fall together. Small, nimble traders who carefully manage trading costs may have the best shot.

…dramatic growth in the number of actively managed mutual funds has driven the proportion of truly skilled funds down, without commensurate reduction in average fund fees and expenses.

…game-like trading-enabled visual abstractions of the stock market may encourage individuals to see the market as amusement and treat trading like “edgework,” wherein experiencing anticipated risk becomes an end in itself.

Do companies famously known as good places to work outperform as investments? Or, contrarily, do they waste resources keeping employees happy? In his May 2007 paper entitled “Does the Stock Market Fully Value Intangibles? Employee Satisfaction and Equity Prices”, Alex Edmans analyzes the relationship between employee satisfaction and long-term stock performance. He identifies companies with… Keep Reading

Has the market evolved to extinguish exploitability of reactions to corporate stock buyback and secondary offering activities? In their December 2012 draft paper entitled “The Persistence of Long-Run Abnormal Stock Returns: Evidence from Stock Repurchases and Offerings”, Fangjian Fu and Sheng Huang compare recent (2003-2010) long-run abnormal returns following U.S. corporate stock buyback and Seasoned… Keep Reading

Does the market pay a premium to equity funds with relatively high “bad” (left tail) volatility? In their May 2013 paper entitled “Volatility vs. Tail Risk: Which One is Compensated in Equity Funds?”, James Xiong, Thomas Idzorek and Roger Ibbotson compare return premiums for conventional volatility (standard deviation of total returns) and tail risk (value-at-risk)… Keep Reading

Does long-term media coverage of a firm exert predictable pressure on its stock price? In the November 2015 version of their paper entitled “Ninety Years of Media Coverage and the Cross-Section of Stock Returns”, Alexander Hillert and Michael Ungeheuer examine relationships between firm media coverage and stock returns. Specifically, they relate long-term New York Times firm coverage/changes in… Keep Reading