Investing Research Articles

...inflation levels and expectations are key to equity market performance, and monetary policies that successfully manage inflation risks would promote stock market stability.

...stocks of firms with high ACSI customer satisfaction ratings outperform the market on average over the long term. Said differently, investors appear to undervalue customer satisfaction systematically.

...share repurchase announcements are now more reliable indicators of actual buyback activity, and consequent beneficial impact on earnings per share, than they were before 2004.

As suggested by a reader, we evaluate here the Trading Wire archives at Tobin Smith’s ChangeWave, which extend back to November 2004. Tobin Smith, according to ChangeWave.com, is “among an esteemed new breed of investment...

Do companies famously known as good places to work outperform as investments? Or, contrarily, do they waste resources keeping employees happy? In his May 2007 paper entitled “Does the Stock Market Fully Value Intangibles? Employee...

...there is a highly significant value premium among Australian stocks, and the book-to-market ratio is the best way to capture that premium. A size effect exists only among the very smallest stocks.

...investors should perhaps lean toward stocks (real estate) when the electorate leans to the right (left).

...there is no evidence of any systematic intraday inefficiencies in SPDR data.

...the most liquid stocks on average outperform, and this liquidity effect may be central to the value premium.

Stocks with high historical volatility should produce high returns as reward for extra risk. Shouldn’t they? In the April 2007 version of their paper entitled “The Volatility Effect: Lower Risk without Lower Return”, David Blitz...

Does the head-and-shoulders stock price pattern embody investor attitudes that traders can exploit to earn abnormal returns? Or, does it represent an opportunity for the statistics-challenged to be fooled by randomness? In their October 2006...

...neither bullish nor bearish candlestick signals reliably generate abnormal returns in the expected direction for large-capitalization U.S. stocks during recent years.

How does “the group that is arguably best qualified, finance professors, …assess the importance of valuation techniques, asset-pricing models, market anomalies, firm characteristics, corporate events, seasonal variables, and other information” when they invest for themselves?...

...investors have expected a fairly stable value premium of about 6% per year over the past 60 years, derived mostly from growth in dividends.

...there is considerable redundancy and invalidity among the many factors used to explain differences in returns among individual stocks. Three factors may be necessary and sufficient, with liquidity the most influential.

...investors systematically overvalue (undervalue) stocks when they expect earnings per share to be low (high). Their expectations exhibit conservatism bias with respect to both the downside and upside extremes.

...status may be more powerful than wealth as a motivator, with significant implications for investor/trader behavior.

...earnings acceleration helps explain stock returns, most notably when it amplifies the direction of earnings growth (both positive or both negative).

...there is a tendency for stocks worldwide to reprise their monthly return behavior every 12 months, with intracycle reversals, over periods of many years. Results suggest calendar-connected market structures.

...a small-stock buy-and-hold approach benefits fully from upside volatility (beta) but does not suffer the entire penalty of downside volatility.

Are stock market forecasters prone to hyperbole? Is there logic to predicting plunges and melt-ups at probabilities unjustified by rigorous empirical analysis? In their February 2007 paper entitled “Probability Elicitation, Scoring Rules, and Competition among...

...Benjamin Graham-style value investing still works but is more difficult to execute than in the past because severe undervaluation has become rarer.

...it appears that some short selling is manipulative, seeking to scare other traders out of their holdings during sharp but temporary engineered price drops.

...there is an "information risk premium" such that stocks not covered by the news media yield significantly higher future returns than stocks heavily covered, even after accounting for other widely used risk factors.

...hedge fund managers seem to be no better at long-equity investing than mutual fund managers; they do not outperform the market.