Investing Research Articles

Is this process too easy for the average investor?

...stock message boards, used with caution, have some value.

...Mr. Bennett would recommend focusing long-term, non-U.S. investments in Australia, Britain, Canada, Ireland, New Zealand and perhaps South Africa and India. "The Anglosphere is where the action is going to be."

In case your mutual fund’s got you down…

...behavioral finance adds elements of human irrationality to the standard finance foundation concepts of Modern Portfolio Theory and Efficient Markets Hypothesis.

...a trading strategy based on simple moving averages is most appropriate for small capitalization stocks.

...stock market returns and volatility reflect investor uncertainty regarding the likelihood and nature of Congressional activity. This effect is economically significant.

In case the market's got you down...

...the Fed Model better describes the behavior of the market P/E over the past forty years than does a mean-reverting model.

...some risk-tolerant investors successfully exploit significant informational advantages by concentrating their portfolios in a few stocks that they know well.

In his December 2004 paper, Jason Hsu shows that: “Cap-Weighted Portfolios Are Sub-optimal Portfolios”. Noting that over $10 trillion are currently invested in passive capitalization-weighted indices, he examines data from 1962-2003 to show that:

...if you consider analyst recommendations when picking stocks, you really should check for investment banking conflicts. Better yet, just ignore the analysts.

...underperformance of high short interest stocks may be limited to those with high levels of informed (non-arbitrage, non-noise) trading.

...the higher the probability that trading in a stock is informed, the greater the size and persistence of stock price movement.

...short selling shocks move stock prices ipso facto. They are news in and of themselves. In the absence of contrary information or reactive strategies, investors should avoid short-shocked stocks.

...this research suggests that investors should be inclined to sell speculative U.S. stocks in late spring and buy them in the fall.

...reasonably isolated attention-grabbing events are opportunities for profitable day trading.

In his June 2004 paper on “What Are Stock Investors’ Actual Historical Returns”, Ilia Dichev examines stock market capital inflows and outflows to determine how well investors really perform compared to buy-and-hold returns. He concludes...

In the February 2005 issue of The Financial Review, Burton Malkiel offers “Reflections on the Efficient Market Hypothesis: 30 Years Later” as a pudding-based proof of his famous proposition. He pits the performance of professional...

...21st-century investors should curb their exuberance.

...short selling is more effective at buffering exuberance for individual stocks than for the overall market.

...mutual fund inflows naively chase past returns.

...the media constitute a possibly destabilizing element, since they support the continuation and reinforcement of states of disequilibrium, or maybe even trigger them.

...investor emotions drive market volatility, but there is an asymmetry to fear and greed.

...individual investors should be wary of investing in stocks that are the top mutual fund holdings.