Investing Research Articles

A subscriber commented and asked: “I have been wondering whether Morningstar’s estimate of ‘fair value’ for stocks has any relationship to actual subsequent returns. For instance, when the fair value is more than double the market price, is the return over the next year substantially greater than for stocks where the fair value is less… Keep Reading

Are exchange-traded funds (ETF) focused on Initial Public Offerings of stocks (IPO) attractive? To investigate, we consider three of the largest IPO ETFs and one recent Special Purpose Acquisition Company (SPAC) ETF, one of which is no longer available, in order of longest to shortest available histories: First Trust US Equity Opportunities ETF (FPX) –… Keep Reading

Are more factors better for predicting stock market returns? In their April 2025 paper entitled “The Limited Virtue of Complexity in a Noisy World”, Álvaro Cartea, Qi Jin and Yuantao Shi analyze the interactions between stock factor noisiness (errors/uncertainties) and factor model complexity in portfolio optimization. Specifically, they study how factor noise affects the predictive… Keep Reading

Does the Memorial Day holiday signal any unusual U.S. stock market return effects? By its definition, this holiday brings with it any effects from three-day weekends and sometimes the turn of the month. Prior to 1971, the U.S. celebrated Memorial Day on May 30. Effective in 1971, Memorial Day became the last Monday in May…. Keep Reading

Should a long-only equity investor seeking exposure to the size factor (stocks with small market capitalizations tend to outperform) and the value factor (stocks that are cheap with respect to fundamentals tend to outperform) choose two distinct funds or a combined small-value fund? In his March 2025 paper entitled “Small, Value, or Small/Value?”, Javier Estrada… Keep Reading

Below is a weekly summary of our research findings for 5/12/25 through 5/16/25. These summaries give you a quick snapshot of our content the past week so that you can quickly decide what’s relevant to your investing needs. Subscribers: To receive these weekly digests via email, click here to sign up for our mailing list.

Are stock and sector momentum strategies, as implemented by exchange-traded funds (ETF), attractive? To investigate, we consider nine momentum-oriented equity ETFs, all currently available, in order of longest to shortest available histories: Invesco Dorsey Wright Momentum ETF (PDP) – invests at least 90% of assets in approximately 100 U.S. common stocks per a proprietary methodology… Keep Reading

What are the implications of stock trading volume spikes for near-term returns? In their February 2025 paper entitled “Volume Shocks and Overnight Returns”, Álvaro Cartea, Mihai Cucuringu, Qi Jin and Mungo Wilson study the effects of stock trading volume shocks during normal trading hours on subsequent overnight and next-day returns. For each stock each day,… Keep Reading

Can investors exploit the definition of conventional 12-2 stock momentum (long the tenth, or decile, of stocks with the highest returns from 12 months ago to two months ago and short the decile with the lowest) to form more persistent momentum portfolios? In the April 2025 revision of their paper entitled “Momentum at Long Holding… Keep Reading

Do individual investors trade carefully and cautiously, or do they make snap judgments? In their March 2025 paper entitled “The Research Behavior of Individual Investors”, Toomas Laarits and Jeffrey Wurgler employ browser histories for an approximately representative sample of U.S. individual investors to address: How much time do they spend on stock research? Which sites… Keep Reading