Investing Research Articles

…very recent data suggests that short sellers may have lost their ability to predict bad news and stock price declines.

…mutual funds may function mostly as passive vehicles through which active individual investors (reallocators) voluntarily transfer wealth to public corporations. By doing the opposite of these individuals, one can construct a portfolio with high returns. By ceasing reallocations, mutual fund investors in aggregate could boost their Sharpe ratio by 9%.

…front-running the predictable effects of unusual mutual fund inflows and outflows on stocks held in common offers significant excess returns.

…situations involving herded traders and/or a small number of shareholders are good candidates for producing mispriced stocks.

…expertise does not mitigate bias. Even highly experienced investors/traders should consider measuring their estimation errors for related tasks to calibrate their judgments.

…portfolio changes after achieving the Morningstar 5-star rating hurt fund performance, and investors should be cautious about using this rating as the principal means of selecting mutual funds. Handling large cash inflows attracted by the high rating may be the culprit.

If your crystal ball has not been working so well…

In their March 2005 paper entitled “Do Sell-Side Analysts Exhibit Differential Target Price Forecasting Ability?”, Mark Bradshaw and Lawrence Brown test the accuracy of 12-month stock price targets both for individual analysts and for analysts overall. Using a filtered sample of about 100,000 individual 12-month stock price targets from Thomson Financial over the period 1997-2002,… Keep Reading

…short sellers throw in the towel (throw more punches) when stock prices move against (with) their positions.

…given that trading involves logical reasoning, numerical computation and long-term planning, one component of successful trading may be a reduced level of emotional reactivity.