...equity returns may react quickly to some predictors and slowly to others, and they may respond most strongly to short or extended predictor movements. "Standardized" approaches to predictor interval measurement may not work.
We evaluate here the weekly “The Outlook” column in BusinessWeek online by Standard and Poor’s since May 2003 (the earliest available). According to Standard & Poor’s, “‘The Outlook‘ is a unique investment advisory service…[that] provides...
...the well-known stock market anomalies may be much less reliable in rational practice than they appear in hindsight.
...investors may be able to exploit time variation of the value premium based on the state of the economy, moving out of (into) value as recessions approach (end).
Do 52-week highs and lows trigger unusual trading and returns for individual stocks? In their recent paper entitled “Volume and Price Patterns Around a Stock’s 52-Week Highs and Lows: Theory and Evidence”, Steven Huddart, Mark...
...the nonfarm payroll, GDP advance and ISM manufacturing data releases move markets the most, affecting interest rates and currency exchange rates more than stocks. Impacts are most pronounced immediately after release.
...evidence from simple tests does not support a belief that there is a systematic relationship between the annual rate of FDIC bank closings and assistance transactions and annual U.S. stock market returns.
...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...
...retrospective analysis indicates that investors can identify growth stocks, but the long-term premium they pay for them is about twice that warranted by actual growth.
...very small numbers of extreme return days have a massive impact on long-term stock returns in emerging markets. The naive probability of predicting which days will be extreme is very low.
Are investors/traders irrationally attracted to stocks that have recently acted like winning lottery tickets? In their August 2008 paper entitled “Maxing Out: Stocks as Lotteries and the Cross-Section of Expected Returns”, Turan Bali, Nusret Cakici...
...investors/traders may be able to enhance momentum trading strategies by focusing on stocks that fit most strongly into a growth or value style.
...this compilation of suggestions and questions can help investors/traders assess the credibility of returns claimed by advisory services.
...there is probably a substantial headwind for those speculating on stock pops by buying near-expiration, out-of-the-money call options. Selling such options may be reliably profitable.
...investors may be able to exploit a two-year reversion effect signaled by past returns of the broad value-weighted U.S. stock market.
...hedge fund investors are probably better off with maverick funds, perhaps new ones every couple of years, than with those cut from the herd.
...this simple sector ETF pair trading strategy offers modest average abnormal returns, but only infrequent trading opportunities. A standalone pairs trading strategy of any kind probably requires a large inventory of potential pairs.
Just what does it mean to be a quant? In his December 2002 article entitled “The Boy’s Guide to Pricing & Hedging “, Emanuel Derman offers an “abbreviated poor man’s guide” to quantitative finance. He...
...hedge portfolios of matched pairs of stocks has offered persistently solid risk-adjusted returns, but diminishing raw returns, over the past 40 years.
...evidence indicates that the Australian stock market offers a strong value premium and a weak size effect.
...over the long term, systematic use of stop losses in trading individual stocks does not enhance the level of returns, but certain trailing stop losses reduce trading risk (standard deviation of returns).
...commodity futures trading strategies that combine momentum and roll return may offer strong performance largely uncorrelated with those of stocks and bonds.
...the ability of commonly used indicators to predict near-term (one-month) stock market returns appears during economic recessions (periods of high return volatility) but vanishes during economic expansions.
...systematic use of stop-loss orders may be beneficial, especially if one can project the general price trend and apply stop losses accordingly.
...after accounting for data snooping bias, technical analysis does not reliably offer value as a standalone market timing method in any of the 49 MSCI country equity markets.