Investing Research Articles

...testing indicates that the daily stated positions for the next trading day from Palisades Research have no power to predict next-day stock market returns.

...investors who believe that they can find fund managers who reliably generate alpha should consider the enhanced alpha for higher fee trade-off of 130/30 funds.

...investors should beware of the favorite equity investments of stock market newsletter gurus. Many favorites may be swing-for-the-fences speculations.

...inflation shocks significantly affected the U.S. stock market over the past half century, with disinflation (inflation) shocks increasing (decreasing) stock prices and promoting boom (bust) conditions.

...traders may be able to exploit an attention-driven anomaly for very high momentum stocks by going long from five days before to the morning after earnings announcement and short the next five days.

...while of little value to traders, the industrial production (output) gap may have some meaningful predictive power for broad U.S. stock returns over relatively long periods.

...large speculators in commodity futures generally do make money by exploiting risk premiums derived from the theory of storage (and perhaps from momentum trading).

...the high correlation between equity yield and bond yield derives rationally from the tendency for inflation to be elevated during recessions, such that both equity and bond premiums are relatively high during recessions.

We occasionally select for retrospective review an all-time “best selling” research paper from the past few years from the General Financial Markets category of the Social Science Research Network (SSRN). Here we summarize the June...

...cash flow expectations represent a significant positively correlated component of stock returns at both firm and aggregate levels. Their importance grows with investment horizon, dominating discount rate expectations for horizons over three years.

...properly structured mutual fund redemption fees tend to protect long-term investors by penalizing frequent traders. Small redemption fees of long duration are optimal for long-term investors.

A reader inquired about the COTs Timer trading system, which employs information from the Commodity Futures Trading Commission’s (CFTC) combined futures and options Commitments of Traders (COT) reports to time the markets for associated assets....

...traders may be able to exploit predictable seasonal changes in implied volatility that derive from the effects of investor mood on perceived risk and not from variations in actual risk.

...individual active traders on average may be able to beat the market when collaborating on trading methods and opportunities.

Is there a predictable market reaction to stocks reaching round-number n-day highs and lows? In their November 2007 paper entitled “Highs and Lows: A Behavioral and Technical Analysis”, Bruce Mizrach and Susan Weerts investigate whether...

...Lenny Dykstra's deep-in-the-money call options (leveraged) strategy depends more on pure volatility and favorable market conditions than on skill in timing the movements of the underlying stocks. A substantial, multi-month market decline could cause the...

Do commodity futures exhibit short-term momentum and long-term reversion, as do stocks? In the August 2006 version of their paper entitled “Momentum Strategies in Commodity Futures Markets”, Joelle Miffre and Georgios Rallis examine the profitability...

We occasionally select for retrospective review an all-time “best selling” research paper from the past few years from the General Financial Markets category of the Social Science Research Network (SSRN). Here we summarize the January...

...evidence from this UK study supports a belief that a portfolio of stocks with high dividend yields outperforms the broad market most of the time.

...hedge funds that are truly new offer investors notable average outperformance for the first couple of years. However, funds that back fill prior performance data when they first start reporting appear to have already "used...

...evidence suggests that stocks with low institutional trading activity (distinct from institutional ownership) tend to be overpriced, with amplified return anomalies.

We evaluate here the market commentary of Richard Rhodes, previously available via Zacks.com over the period March 2004 through October 2005. Richard Rhodes, editor of “The Rhodes Report” newsletter, is one of Zacks’ “pros.” His...

...evidence supports beliefs that informed traders distort the relationship between the prices for put and call options on individual stocks and that others may be able to exploit these distortions. Relatively expensive calls (puts) predict...

...traders may be able to shave a few basis points off trading costs by timing buys (sells) based on a tendency for exact daily recurrence of recent intraday lows (highs).

...evidence does not support a belief that investors can generate excess returns using an industry allocation strategy based on U.S. presidential politics. Equity return anomalies based on party holding the presidency and presidential term year...