Investing Research Articles

...the apparent outperformance of the The Trend Trade Letter may disappear after correcting for trading frictions, market conditions and data errors.

...U.S. finance professors on average, as of the end of 2007, expect stocks to offer a 5% annual (geometric) risk premium over the next 30 years, a little below their expectation in 2001.

...hedge funds in aggregate exploit a few of the "famous" anomalies, but they apparently have other methods of generating abnormal returns.

...some anomalies are stronger and more consistent than others. Momentum appears to be the strongest and most consistent.

...investors may be able to generate substantial abnormal returns by combining the effects of earnings and accruals surprises, qualified by overall firm operating performance.

...the UBS/Gallup Investor Optimism Index is modestly reactive to recent stock market behavior, but it has no predictive power for stock returns (even before its release to the public).

...value and momentum investing may work across a broad range of asset classes, and the two effects are independent enough that combining them may yield incremental outperformance.

...investors may find edges by considering both the levels of and changes in analyst stock ratings, with the combination more powerful than the separate indications.

...monthly returns for mid-term to long-term Treasuries exhibit a seasonality that is roughly the mirror image of that for stock returns, with November standing out as an exception (strong for stocks and Treasuries).

...expect more dynamic strategies [such as 130% long/30% short] to become passive benchmarks as the investor base becomes more sophisticated and demanding.

...this book is a generally accessible challenge to the widespread use of Gaussian statistics as tools of prediction in socioeconomics (encompassing investing). With strong emphasis on intractable uncertainty, it is necessarily parsimonious and vague regarding...

...mutual fund timers on average underperform passive buy-and-hold mutual fund investors. Investors who use fund-compensated investment advisors exhibit particularly bad timing.

...an investor who enters (exits) the market when the S&P 500 index crosses above (below) its 200-day moving average may miss most of the extremely high volatility days but will probably not enhance cumulative return...

...actively managed mutual funds on average generate about half their value by picking the right industries rather than the right stocks. This big-picture skill, not company analysis, accounts for fund performance persistence.

...perceptions move markets. Market beliefs, which may express mistaken forecasts, are at least as important to asset pricing as macroeconomic fundamentals.

...mutual funds with relatively few holdings tend to underperform, refuting the view that focus on a few ideas supports good stock picking.

How do investors respond to the state of the U.S. federal fiscal deficit? In their August 2007 paper entitled “Fiscal Policy and Asset Markets: A Semiparametric Analysis”, Dennis Jansen, Qi Li, Zijun Wang and Jian...

...big up and down days appear to have some tendency to cluster, with such volatility clusters associated more with market bottoms than with continuing downtrends.

...a few outlier trading days have a massive impact on long-term stock returns, and attempting to forecast which days is a fool's errand.

...stocks react to the surprise element in scheduled Federal Funds Rate announcements. There may be reliable trades in short-term continuation (reversal) of stocks after an initial spike down (up), especially for financial and information technology...

...many eminent economists and political scientists believe that prediction markets could offer significant benefits to society and that government should remove barriers to their productive use.

...recent success (failure) leads to risk-taking (risk-avoidance) among mutual fund managers.

...firm accruals may be a good indicator of future stock returns when combined with a broader measure of firm financial health, or when defined as a fraction of earnings rather than assets.

...investors can significantly outperform the broad U.S. stock market by rotating into cyclical (noncyclical) sectors when the Federal Reserve discount rate begins falling (rising).

...sloppiness in applying statistics can lead to severe misestimates of variability. People should rely on definitions, not intuitions, in assessing volatility.