...volatility-based portfolio strategies derive their effectiveness from: (1) the difference between realized volatility and implied volatility ; and, (2) the difference between call-implied volatility and put-implied volatility.
Does strong (weak) past growth in a company’s total assets predict high (low) future stock returns? Or, does investor overreaction to past data predict the opposite? In the July 2007 update of their paper entitled...
...investing like the Ivy League means a contrarian emphasis on small growth factors with heavier than average use of hedge funds and private equity funds.
...fund investors should focus on funds with high "Active Shares" (holdings very different from their benchmark indexes), low assets under management and high last-year returns.
A reader inquires: “Ken Fisher did a statistical study in his book, The Only Three Questions That Count: Investing by Knowing What Others Don’t, which states that growth (value) is in favor when the yield...
...removal of the tick test for short selling apparently: (1) mitigates overvaluation of stocks; (2) leads to temporary undervaluation of easily borrowed stocks; and, (3) disrupts trading systems that rely on dispersion of analyst earnings...
...the book is a clear and concise summary of Louis Navellier's systematic approach to constructing and maintaining a timely growth stock portfolio intended to outperform in all market conditions.
Robert McHugh, Ph.D. sent comments on our review of his stock market commentaries (“Robert McHugh: Caution Is Warranted”). The following exchange presents Dr. McHugh’s messages without editing. We have edited our responses for formality, brevity...
The unreal deal, as found in the cyber-alleys off Wall Street...
...once adjusted for actual (rather than claimed) investing style, recent hedge fund performance is not a reliable indicator of superior manager ability but is a reliable indicator of inferior manager ability.
...neither journalists nor their informants can systematically and accurately predict stock prices.
...short-term returns are on average significantly higher (lower) following closing prices that lie just above (below) a round number. The effect is probably of ancillary use only to traders.
...the buy recommendations of columnists in prominent business magazines on average underperform an equal-weighted benchmark over the weeks, months and first year after publication. Columnists in Forbes tend to outperform those in Business Week and...
...options for stock indexes are expensive compared to options for the average individual stock, and options for small and value stocks are expensive compared to options for large and growth stocks. Hedge portfolios exploiting these...
...investors can concentrate the informed signals of short sellers by locating stocks with high short interest and low institutional ownership, and an increasing ratio of short interest to institutional ownership.
...change in non-farm employment by itself does not offer enough short-term explanatory power with respect to the stock market to justify trading on the announcement.
Because of the uncertainties involved in choosing stocks, investors/traders are constantly seeking affirmation of their picks. One place they go for affirmation is Jim Cramer’s Mad Money on CNBC. When you get Jim Cramer’s blessing,...
...while dominant factors may be common, different groups of stocks require different factor models to explain the variation in returns among individual stocks within them.
...investors are willing to pay a premium to protect themselves from crashes in individual stocks. Systematically selling puts on individual stocks, with sufficient leverage, can enhance equity portfolio performance.
...Jim Cramer's buy (sell) recommendations tend to gap up (down) overnight to a degree inverse to market capitalization and then level off or reverse over the next few weeks. In general, investors cannot capture the...
We evaluate here the weekly commentary of Merrill Lynch’s Bob Doll from January 2003 (the earliest available) through September 2006. Bob Doll was President and CIO of Merrill Lynch Investment Managers, the firm’s asset management...
...a five-factor model effectively explains differences among individual stock returns, with volatility of past returns at least as important as size, value and momentum factors.
...hedge funds may be more risky than their quantitative strategies indicate because the strategies do not account for the effects of fund growth, proliferation of similar funds and increased leverage. The hedge fund party may...
...hedge funds that conservatively smooth out market bumps with minimal net exposure to equities and mid-range returns tend to be the most reliable outperformers.
...traders should care strongly about their trading, focus on understanding any negative emotions they experience while trading, and work hard to prevent emotions from affecting their risk management practices.