Investing Research Articles

...by trying to make the Federal Funds Rate lead rather than respond to economic fundamentals, the Federal Reserve causes a disconnect between short-tem and long-term interest rates.

...although energy sector ETFs track the price of crude oil fairly well over long periods during 1999-2007, short-term variations in the two series are only slightly related.

...while a dramatic move up (down) in the price of crude oil represents a modest near-term headwind (tailwind) for the overall stock market, oil price is generally not a good predictor of stock market behavior.

...international diversification as implemented by individual U.S. investors on average neither compensates for bad investing/trading practices nor dramatically enhances good ones. While sophisticated investors generally improve returns and (especially) reduce portfolio volatility via positions in...

...investors are willing to pay very high premiums, perhaps irrationally high, to insure against large losses in their stock portfolios. Sellers of this insurance can earn high average returns.

...double 9-to-1 up day events may reliably signal abnormal short-term returns, but designing a system to exploit such rare and unpredictable signals is problematic.

...game-like trading-enabled visual abstractions of the stock market may encourage individuals to see the market as amusement and treat trading like "edgework," wherein experiencing anticipated risk becomes an end in itself.

Is the Bullish Percent Index a useful indicator of overall stock market or sector direction by reliably identifying overbought/oversold conditions from which stock prices are likely to revert? In a study published in the 2005...

...the difference between expert and non-expert performance in investing and financial forecasting is small, making it difficult to discover the nature of financial expertise. Tests of expertise must be realistic.

...fundamental analysis (especially accrual-related indication of poor earnings quality) helps valuation-motivated short sellers identify stocks likely to experience reversal of strong past returns.

...in international markets, secondary share offerings reliably predict poor future stock returns, but share buybacks predict good future returns only for small firms.

...evidence does not support a model of funds flowing predictably back and forth between stocks and T-bills as investors overreact and correct to perceived crises.

...unusual trading by insiders helps isolate which short sellers know what they are doing, and vice versa.

...successful momentum trading may depend critically on restricting consideration to stocks with the lowest total transaction costs.

Do the experts who arguably should have the most informed opinions, finance professors, believe that the U.S. stock market is efficient? Do they invest in accordance with their beliefs? In their August 2007 paper entitled...

...some individual investors/traders do consistently earn economically significant abnormal returns.

...both individual stocks and broad funds have, on average, appreciated overnight and stalled or declined during the trading day over the past 14 years. The first hour of trading may be the worst hour.

But the market is just unsafe at any speed...

But other people were forecasting even higher...

Risk analyzing stormy weather...

...market timing based on technical analysis is not reliably profitable for commodity futures.

Taking a break...

...U.S. stocks tend be be most overvalued under Democratic Presidents, under popular Presidents, during election years and during years when no new major military conflicts start.

...individual investors/traders should be diligent and honest in assessing personal past performance if they want to learn from experience.

...the Australian stock market offers several historical anomalies, most notably size and negative earnings-to-price, that investors/traders may be able to exploit.