Investing Research Articles

...investors may be able to exploit the value premium more efficiently and completely by defining it using the Enterprise Multiple rather than the book-to-market ratio.

Best guess is that combining low volatility with high momentum might offer an edge...

...allocating funds to stocks and Treasuries according to the relationships between their past returns and these three off-the-beaten-path macroeconomic indicators may produce market-beating results.

The notion that individuals are at a disadvantage compared to big traders in constructing and maintaining a diversified portfolio of specific stocks seems reasonable.

For the strike-rolling process you describe to enhance returns over the long run, the incrementally accrued time value must more than offset the combined effects of: (1) the incremental trading frictions (principally bid-ask spreads); and,...

The net of this research appears to be that only very low-cost traders (such as market makers) can effectively exploit the anomaly.

It seems reasonable to infer from this analysis that many people "renting" automated trading strategies do not do very well and that they may underperform the broad stock market as a group.

IRS rules involving wash sales and options as described in Publication 550 (2008) are complicated.

...value-beta and momentum-beta relationships can and recently have reached such extremes that value and momentum strategies may impound untended assumptions about the future market trend.

CXOadvisory.com has not developed any screens or models to implement or replicate this approach.

Results suggest that the TOTM return is roughly zero in falling markets, so it can still support options selling (but with no safety margin for at-the-money options). Based on this result, selling options only when...

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...

...evidence from simple tests on a limited dataset do not support a belief that net money flow is usefully predictive of weekly or monthly stock market returns.

Research showing that equity investors in aggregate materially underperform the market via timing of purchases and sales (aggregated money flow) is extensive. See...

...evidence indicates that traders can reliably earn a material premium by providing liquidity for after-hours trading of U.S. stocks and closing these trades at the next market open, so long as the after-hours trading in...

"Results appear to indicate that firm executives are not especially good timers of the aggregate stock market."

The rationale is recognition of a short-term reaction for stocks with momentum concentrated in a recent interval.

The valuation-based method described in "Modeling the Logic of Valuation-motivated Short Sellers" is a candidate...

...The Dark Side of Valuation presents quantitative approaches to modeling the worth of companies for which valuation is especially complex and/or judgmental.

...the beliefs that appear to motivate the approach described on the web site have support from research.

...the Social Science Research Network (SSRN) is the principal resource for papers that feed CXOadvisory.com summaries of research done by others.

...individual investors tend to have above-average intelligence but still be genetically constrained from free-wheeling use of that intelligence in making investment choices.

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.

Jason Kelly has occasionally requested further explanation and reconsideration regarding our evaluation of his forecasting record. His requests and our responses follow:

...evidence indicates that employment growth relates negatively to future stock market behavior, most strongly at a one-year forecast horizon.