September 3, 2009 - Big Ideas
Continuation of uncanniness is a possibility, but instead the past relationship may derive from substantial data snooping bias and thus break down out of sample.
September 21, 2009 - Big Ideas
A reader suggested: “I know you’ve looked at Didier Sornette’s work in the past, but I think it would be worthwhile to look at his work again. His latest is ‘Bubble Diagnosis and Prediction of the 2005-2007 and 2008-2009 Chinese Stock Market Bubbles’, with abstract as follows:”
April 16, 2010 - Animal Spirits, Fundamental Valuation
…The Little Book of Behavioral Investing is a broad survey of behavioral biases and countermeasures as related to financial markets, especially for value investors. The self-awareness espoused may be as important to successful investing as valuation methods.
November 30, 2010 - Big Ideas, Technical Trading
Is the aggregate effect of technical trading visible and exploitable at the equity index level? In his March 2007 paper entitled “The Interaction between the Aggregate Behavior of Technical Trading Systems and Stock Price Dynamics”, Stephan Schulmeister investigates how S&P 500 Index futures prices relate to the aggregate trading signals of 2,580 widely used trend-following… Keep Reading
November 29, 2010 - Currency Trading, Technical Trading
Is the aggregate effect of technical trading visible and exploitable in currency exchange rate trading? In his 2008 paper entitled “Aggregate Trading Behaviour of Technical Models and the Yen/Dollar Exchange Rate 1976-2007”, Stephan Schulmeister investigates the interaction between the aggregate signaling of 1,024 moving average and momentum rules and the behavior of the yen/dollar exchange… Keep Reading
March 4, 2011 - Fundamental Valuation, Investing Expertise
Do online forums of arguably well-informed investors pay off for their members? In their February 2011 paper entitled “Talking Your Book: Social Networks and Price Discovery”, Wesley Gray and Andrew Kern study the sharing of valuation beliefs by professional investors via a social network. Specifically, they focus on ValueInvestorsClub.com, “designed to facilitate idea sharing among…250… Keep Reading
December 11, 2013 - Sentiment Indicators
Both “Stock Return Correlations and Retail Trader Herding” and “Stock Return Correlations and Equity Market Stress” imply that extremely high correlations among stock returns accompany severe market declines and may signal market bottoms. Is there some simple way to exploit this implication? Keying on the former item, we investigate the correlation of returns between a large-stock… Keep Reading
October 30, 2012 - Sentiment Indicators
Do investors under stress herd, thereby driving return correlations upward? In their October 2012 paper entitled “Quantifying the Behavior of Stock Correlations Under Market Stress”, Tobias Preis, Dror Kenett, Eugene Stanley, Dirk Helbing and Eshel Ben-Jacob relate average stock return correlations to stock market conditions with focus on dramatic market losses. Specifically, they calculate the average Pearson… Keep Reading
August 1, 2014 - Animal Spirits, Individual Investing
How strong is investor herding with respect to friends, family and co-workers? In their June 2014 paper entitled “Peer Effects, Personal Characteristics and Asset Allocation”, Annie Zhang, Ben Jacobsen and Ben Marshall examine the roles of personal characteristics (age, gender, wealth and tax rate), peer influence (household, neighbors and coworkers), and financial advice in individual investor asset class allocations and switching decisions. Their… Keep Reading
July 12, 2017 - Big Ideas, Strategic Allocation
Michael Covel prefaces the 2017 Fifth Edition of his book, Trend Following: How to Make a Fortune in Bull, Bear, and Black Swan Markets, by stating that: “The 233,092 words in this book are the result of my near 20-year hazardous journey for the truth about this trading called trend following. …Trend following…aims to capture the majority… Keep Reading